A Political Economy Model of Merger Policy in International Markets
Article first published online: 30 DEC 2010
© 2010 The London School of Economics and Political Science
Volume 79, Issue 313, pages 115–136, January 2012
How to Cite
MOTTA, M. and RUTA, M. (2012), A Political Economy Model of Merger Policy in International Markets. Economica, 79: 115–136. doi: 10.1111/j.1468-0335.2010.00874.x
- Issue published online: 13 DEC 2011
- Article first published online: 30 DEC 2010
- Final version received 15 June 2010.
This paper looks at the political economy of merger policy under autarky and in international markets. We assume that merger policy is decided by antitrust authorities—whose objective is to maximize welfare—but can be influenced by governments, which are subject to lobbying by firms (insiders or outsiders to the merger). We argue that political economy distortions may explain some of the recently observed merger policy conflicts between authorities and politicians, as well as between institutions belonging to different countries. We illustrate our analysis with applications motivated by recent merger cases that have been widely debated in the international press.