We would like to thank Pedro Pita Barros, João Gata and the Editor for their useful comments and suggestions. The usual disclaimer applies. Financial support from Fundação para a Ciência e Tecnologia, program FEDER/POCI 2010 is acknowledged.
Horizontal Mergers, Entry and International Trade
Version of Record online: 14 JUL 2014
© 2014 John Wiley & Sons Ltd
Review of International Economics
Volume 22, Issue 5, pages 923–943, November 2014
How to Cite
Brito, D. and Magueta, D. (2014), Horizontal Mergers, Entry and International Trade. Review of International Economics, 22: 923–943. doi: 10.1111/roie.12140
- Issue online: 3 OCT 2014
- Version of Record online: 14 JUL 2014
- Fundação para a Ciência e Tecnologia
We use a two-country trade model to analyze an authority's decision to approve or reject a merger followed by entry, when the entrant can choose where to locate. We show that approval of a merger in the small country followed by timely, likely and sufficient entry may lead to lower consumer welfare than its rejection: when the alternative to such entry is entry into another country that also benefits consumers through trade, then the gains of attracting entry are small. In this context, we discuss differences between optimal decisions by the small country's authority, large country's authority and supranational authority.