Thursday, January 5, 2012
Posted by D. Daniel Sokol
A. Ray Chaudhuri (Tilburg University, Center for Economic Research) explores Cross-Border Mergers and Market Segmentation.
ABSTRACT: This paper shows that cross-border mergers are more likely to occur in industries which serve multiple segmented markets rather than a single integrated market, given that cost functions are strictly convex. The product price rises in the market where an acquisition is made but falls in the other, decreasing the acquisition price of other firms (in contrast to the results in the existing merger literature on integrated markets). Although the sum of consumer surplus across the countries may rise in response to a given acquisition, one of the countries gains at the expense of the other.