DP10851 Merger Policy in a Quantitative Model of International Trade

Author(s): Holger Breinlich, Volker Nocke, Nicolas Schutz
Publication Date: September 2015
Date Revised: September 2018
Keyword(s): International Trade, Merger Policy, Mergers and Acquisitions, Oligopoly, Trade Policy
JEL(s): F12, F13, L13, L44
Programme Areas: Industrial Organization, International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10851

In a two-country international trade model with oligopolistic competition, we study the conditions on market structure and trade costs under which a merger policy designed to benefit domestic consumers is too tough or too lenient from the viewpoint of the foreign country. We calibrate the model to match industry-level data in the U.S. and Canada. Our results suggest that at present levels of trade costs, merger policy is too tough in the vast majority of sectors. We also quantify the resulting externalities and study the impact of different regimes of coordinating merger policies at varying levels of trade costs.