Tuesday, September 2, 2008
Posted by D. Daniel Sokol
Massimo Motta and Michele Ruta, both of the European University Institute - Economics Department have created A Political Economy Model of Merger Policy in International Markets.
ABSTRACT: 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.