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Horizontal Mergers in a Liberalizing World Economy
Author(s) -
Zhang Anming,
Chen Hongmin
Publication year - 2002
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.00026
Subject(s) - economics , liberalization , imperfect competition , economies of scale , economic welfare , small open economy , profit (economics) , welfare , open economy , international economics , market economy , competition (biology) , economy , international trade , monetary economics , microeconomics , monetary policy , ecology , exchange rate , biology
This paper is concerned with the effect of horizontal mergers in an open economy environment. It is found that, with the presence of economies of scale and imperfect competition, a domestic merger may bring about an additional gain to the country in that it shifts profit from foreign to domestic firms. Consequently, the condition on the degree of economies of scale for permitting domestic horizontal mergers would be weaker under an open economy than under a closed economy. Furthermore, the analysis shows that such mergers can also raise foreign welfare. Finally, the model is used to discuss the need to coordinate merger policies among trading partners in tandem with trade liberalization.