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Private and public incentives for mergers in the face of foreign entry

Fang, Ryan; Richardson, Martin

Description

We consider private and public incentives for domestic firms to merge in the face of foreign entry. We consider the gains to two merging firms and to national welfare in a linear Cournot model. With heterogeneous firms and possible synergies, greater foreign entry tends to enhance both private and public incentives for domestic mergers. Thus, policymakers have no cause to doubt the intentions of firms seeking to merge: when it is in the firms' interests then it is also in the public interest....[Show more]

dc.contributor.authorFang, Ryan
dc.contributor.authorRichardson, Martin
dc.date.accessioned2015-12-10T23:07:52Z
dc.identifier.issn1363-6669
dc.identifier.urihttp://hdl.handle.net/1885/63047
dc.description.abstractWe consider private and public incentives for domestic firms to merge in the face of foreign entry. We consider the gains to two merging firms and to national welfare in a linear Cournot model. With heterogeneous firms and possible synergies, greater foreign entry tends to enhance both private and public incentives for domestic mergers. Thus, policymakers have no cause to doubt the intentions of firms seeking to merge: when it is in the firms' interests then it is also in the public interest. However, at least for certain parameterisations, private gains from mergers become positive at a lower level of foreign entry than do public gains. This suggests that private firms may have an incentive to overstate the degree of foreign competition they anticipate facing-for example, after liberalizing foreign investment rules-to persuade policymakers that a proposed domestic merger is in the national interest.
dc.publisherBlackwell Publishing Ltd
dc.sourceReview of Development Economics
dc.subjectKeywords: development economics; firm size; foreign direct investment; investment; liberalization; merger; policy making; private sector
dc.titlePrivate and public incentives for mergers in the face of foreign entry
dc.typeJournal article
local.description.notesImported from ARIES
local.identifier.citationvolume14
dc.date.issued2010
local.identifier.absfor140202 - Economic Development and Growth
local.identifier.absfor140209 - Industry Economics and Industrial Organisation
local.identifier.absfor140210 - International Economics and International Finance
local.identifier.ariespublicationf2965xPUB764
local.type.statusPublished Version
local.contributor.affiliationFang, Ryan, University of Chicago
local.contributor.affiliationRichardson, Martin, College of Business and Economics, ANU
local.description.embargo2037-12-31
local.bibliographicCitation.issue3
local.bibliographicCitation.startpage520
local.bibliographicCitation.lastpage532
local.identifier.doi10.1111/j.1467-9361.2010.00568.x
dc.date.updated2016-02-24T08:32:34Z
local.identifier.scopusID2-s2.0-77954787348
local.identifier.thomsonID000279988200008
CollectionsANU Research Publications

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