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Political Economy Model of Cross‐Border Mergers Under Mixed Oligopoly
Author(s) -
Li Jie,
Lu Jing,
Jiang Mobing
Publication year - 2017
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 - 10.1111/1468-0106.12205
Subject(s) - oligopoly , politics , government (linguistics) , economics , welfare , profit (economics) , market economy , microeconomics , political science , linguistics , philosophy , law
This paper analyses the horizontal cross‐border mergers under the framework of political economy in mixed markets. We explore the conditions under which a cross‐border merger between a partially privatized foreign public firm and a profit‐maximizing domestic firm occurs and is approved by the domestic government. We show that a welfare‐maximizing domestic government approves the merger if the share owned by the foreign government is sufficiently low and the merger is relatively efficient; a government only caring about political contributions always approves such a merger; we also consider the case where the government cares about both social welfare and political contributions.