DP6894 A Political Economy Model of Merger Policy in International Markets

Author(s): Massimo Motta, Michele Ruta
Publication Date: June 2008
Keyword(s): Antitrust policy, European Union, Lobbying, Mergers
JEL(s): D72, F59, H11, L40
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6894

This paper looks at the political economy of merger policy under autarky and in international markets. We assume that merger policy is decided by antitrust authorities (whose objective is to maximize welfare) but can be influenced by governments, which are subject to lobbying by the firms (be they insiders or outsiders to the merger). We argue that political economy distortions may explain some of the recently observed merger policy conflicts between authorities and politicians, as well as between institutions belonging to different countries. We illustrate our analysis with applications motivated by recent merger cases, which have been widely debated in the international press.