Merger Policy to Promote Global Players? A Simple Model

We use a simple framework where firms in two countries serve their
respective domestic markets and a world market to analyze under
which conditions cost-reducing mergers will be beneficial for the
merging firms, the home country, and the world as a whole. For a
national merger, the policies enacted by a national merger
authority tend to be overly restrictive from a global efficiency
perspective. In contrast, all international mergers that benefit
the merging firms will be cleared by either a national or a
regional regulator, and this laissez-faire approach is also
globally efficient. Finally, we derive the properties of the
endogenous merger equilibrium.