Merger Policy in a Quantitative Model of International Trade. Issue 626 (7th November 2019)

• Record Type: Journal Article
• Authors: Breinlich, Holger; Nocke, Volker; Schutz, Nicolas
• Is Part Of: Economic journal. Volume 130:Issue 626(2020)
• Page Start: 393
• Page End: 421
• Publication Date: 2019-11-07
• Subjects: Economics -- Periodicals; Économie politique -- Périodiques; 330.05
• DOI: 10.1093/ej/uez061
• Languages: English
• ISSNs: 0013-0133

Abstract

Abstract: 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 either too tough or too lenient, from the viewpoint of the foreign country. We calibrate the model to match industry-level data in the USA 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 co-ordinating merger policies at varying levels of trade costs.