[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/a/eee/resene/v45y2016icp65-79.html
   My bibliography  Save this article

Mergers in Cournot markets with environmental externality and product differentiation

Author

Listed:
  • Fikru, Mahelet G.
  • Gautier, Luis
Abstract
Due to the extensive work on why mergers take place our understanding of merger incentives has improved. However, there are not many studies examining how differences in pollution parameters between post- and pre-merger markets affect the attractiveness of merger deals. This study examines conditions under which the attractiveness of a merger deal increases in a Cournot market with product differentiation and environmental externality. Our findings suggest that, (i) the attractiveness of a deal increases as products become more differentiated, (ii) merger deals could result in lower optimal emission tax post-merger, (iii) the attractiveness of a deal is more likely to increase if the merged entity is not too pollution-intensive post-merger relative to its pre-merger pollution intensity; and (iv) when merged entities modify products to be greener, they are more likely to benefit more from the deal if they are not too pollution-intensive.

Suggested Citation

  • Fikru, Mahelet G. & Gautier, Luis, 2016. "Mergers in Cournot markets with environmental externality and product differentiation," Resource and Energy Economics, Elsevier, vol. 45(C), pages 65-79.
    • Handle: RePEc:eee:resene:v:45:y:2016:i:c:p:65-79
    DOI: 10.1016/j.reseneeco.2016.06.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0928765516301385
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.reseneeco.2016.06.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
    2. Takeshi Ebina & Daisuke Shimizu, 2009. "Sequential Mergers With Differing Differentiation Levels," Australian Economic Papers, Wiley Blackwell, vol. 48(3), pages 237-251, September.
    3. Steffen Huck & Kai A. Konrad & Wieland Müller, 2001. "Profitable Horizontal Mergers without Cost Advantages: The Role of Internal Organization, Information, and Market Structure," CESifo Working Paper Series 435, CESifo.
    4. Fujiwara, Kenji, 2009. "Environmental policies in a differentiated oligopoly revisited," Resource and Energy Economics, Elsevier, vol. 31(3), pages 239-247, August.
    5. Montero, Juan-Pablo, 2002. "Permits, Standards, and Technology Innovation," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 23-44, July.
    6. Levin, Dan, 1990. "Horizontal Mergers: The 50-Percent Benchmark," American Economic Review, American Economic Association, vol. 80(5), pages 1238-1245, December.
    7. Sajal Lahiri & George Symeonidis, 2007. "Piecemeal Multilateral Environmental Policy Reforms under Asymmetric Oligopoly," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(5), pages 885-899, October.
    8. George Norman & Lynne Pepall & Daniel Richards, 2005. "Product differentiation, cost‐reducing mergers, and consumer welfare," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1204-1223, November.
    9. Tina Kao & Flavio Menezes, 2010. "Welfare‐Enhancing Mergers Under Product Differentiation," Manchester School, University of Manchester, vol. 78(4), pages 290-301, July.
    10. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    11. Mahelet G. Fikru, 2013. "Environmental Policies, Mergers and Welfare," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 449-461, July-Dece.
    12. Satya P. Das & Sarbajit Sengupta, 2001. "Asymmetric Information, Bargaining, and International Mergers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 565-590, December.
    13. Qiu, Larry D. & Zhou, Wen, 2006. "International mergers: Incentives and welfare," Journal of International Economics, Elsevier, vol. 68(1), pages 38-58, January.
    14. Horn, Henrik & Persson, Lars, 2001. "Endogenous mergers in concentrated markets," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1213-1244, September.
    15. Juan-Pablo Montero, 2002. "Market Structure and Environmental Innovation," Journal of Applied Economics, Universidad del CEMA, vol. 5, pages 293-325, November.
    16. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    17. Cellini, Roberto & Lambertini, Luca & Ottaviano, Gianmarco I. P., 2004. "Welfare in a differentiated oligopoly with free entry: a cautionary note," Research in Economics, Elsevier, vol. 58(2), pages 125-133, June.
    18. Canton, Joan & David, Maia & Sinclair-Desgagné, Bernard, 2012. "Environmental Regulation and Horizontal Mergers in the Eco-industry," Strategic Behavior and the Environment, now publishers, vol. 2(2), pages 107-132, July.
    19. Banal-Estanol, Albert, 2007. "Information-sharing implications of horizontal mergers," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 31-49, February.
    20. Lommerud, Kjell Erik & Sorgard, Lars, 1997. "Merger and product range rivalry," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 21-42, November.
    21. Juan-Pablo Montero, 2002. "Market Structure and Environmental Innovation," Journal of Applied Economics, Taylor & Francis Journals, vol. 5(2), pages 293-325, November.
    22. Ramon Faulí‐Oller, 2002. "Mergers between Asymmetric Firms: Profitability and Welfare," Manchester School, University of Manchester, vol. 70(1), pages 77-87, January.
    23. Friedrich Trautwein, 1990. "Merger motives and merger prescriptions," Strategic Management Journal, Wiley Blackwell, vol. 11(4), pages 283-295, May.
    24. Mahelet G. Fikru & Sajal Lahiri, 2013. "Can a Merger Take Place among Symmetric Firms?," Studies in Microeconomics, , vol. 1(2), pages 155-162, December.
    25. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-187, June.
    26. Larry D. Qiu & Wen Zhou, 2007. "Merger waves: a model of endogenous mergers," RAND Journal of Economics, RAND Corporation, vol. 38(1), pages 214-226, March.
    27. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
    28. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    29. Fikru, Mahelet G. & Lahiri, Sajal, 2014. "Cross-border mergers with flexible policy regime: The role of efficiency and market size," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 58-70.
    30. Hettige, Hemamala & Martin, Paul & Singh, Manjula & Wheeler,David R., 1995. "The industrial pollution projection system," Policy Research Working Paper Series 1431, The World Bank.
    31. Fredrik Carlsson, 2000. "Environmental Taxation and Strategic Commitment in Duopoly Models," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 15(3), pages 243-256, March.
    32. Richard Dagen & Daniel Richards, 2006. "Merger Theory and Evidence: The Baby-Food Case Reconsidered," Discussion Papers Series, Department of Economics, Tufts University 0602, Department of Economics, Tufts University.
    33. J. Alejandro Gelves, 2014. "Differentiation and Cost Asymmetry: Solving the Merger Paradox," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 21(3), pages 321-340, November.
    34. Werden, Gregory J & Froeb, Luke M, 1994. "The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(2), pages 407-426, October.
    35. repec:bla:econom:v:71:y:2004:i:284:p:575-587 is not listed on IDEAS
    36. Gerard Hoberg & Gordon Phillips, 2010. "Product Market Synergies and Competition in Mergers and Acquisitions: A Text-Based Analysis," The Review of Financial Studies, Society for Financial Studies, vol. 23(10), pages 3773-3811, October.
    37. Baker, Jonathan B & Baresnahan, Timothy F, 1985. "The Gains from Merger or Collusion in Product-differentiated Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 33(4), pages 427-444, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Luis Gautier & Mahelet G. Fikru, 2024. "Environmental Taxation and Mergers in Oligopoly Markets with Product Differentiation," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 185-206, Springer.
    2. Garcia, Arturo & Leal, Mariel & Lee, Sang-Ho & Park, Chul-Hi, 2024. "Merger incentive and strategic corporate social responsibility by a multiproduct corporation," International Review of Economics & Finance, Elsevier, vol. 91(C), pages 193-206.
    3. Flavio M. Menezes & Jorge Pereira, 2023. "Imperfect competition, emissions tax and the Porter hypothesis," Australian Institute for Business and Economics DP022023, School of Economics, University of Queensland, Australia.
    4. Luis Gautier & Mahelet G. Fikru, 2024. "Are Big Mergers Welfare Enhancing When There Is Environmental Externality?," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 145-173, Springer.
    5. Hu, Jun & Fang, Qi & Wu, Huiying, 2023. "Environmental tax and highly polluting firms' green transformation: Evidence from green mergers and acquisitions," Energy Economics, Elsevier, vol. 127(PB).
    6. Jihad C. Elnaboulsi & Wassim Daher & Yiğit Sağlam, 2023. "Environmental taxation, information precision, and information sharing," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 301-341, April.
    7. Choi, Pak-Sing & Espinola-Arredondo, Ana & Munoz, Felix, 2020. "Mergers as an environmental ally: Socially excessive and insufficient merger approvals," Working Papers 2020-1, School of Economic Sciences, Washington State University.
    8. Choi, Pak-Sing & Espínola-Arredondo, Ana & Muñoz-García, Félix, 2022. "Environmental policy helping antitrust decisions: Socially excessive and insufficient merger approvals," Resource and Energy Economics, Elsevier, vol. 67(C).
    9. Chuyuan Zhang & Sang‐Ho Lee, 2023. "Foreign passive ownership and tariff‐induced free technology transfer under vertical integration," Manchester School, University of Manchester, vol. 91(2), pages 89-117, March.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fikru, Mahelet G., 2016. "Modelling mergers among polluting firms when environmental policy is endogenous," Economic Analysis and Policy, Elsevier, vol. 49(C), pages 1-6.
    2. Luis Gautier & Mahelet G. Fikru, 2024. "Welfare Impact of New Firm Acquisition," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 105-132, Springer.
    3. Mahelet G. Fikru, 2013. "Environmental Policies, Mergers and Welfare," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(2), pages 449-461, July-Dece.
    4. Mahelet G. Fikru & Sajal Lahiri, 2013. "Can a Merger Take Place among Symmetric Firms?," Studies in Microeconomics, , vol. 1(2), pages 155-162, December.
    5. Luis Gautier & Mahelet G. Fikru, 2024. "Environmental Taxation and Mergers in Oligopoly Markets with Product Differentiation," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 185-206, Springer.
    6. Cosnita-Langlais, Andreea, 2012. "Horizontal market concentration: Theoretical insights from spatial models," Research in Economics, Elsevier, vol. 66(1), pages 22-32.
    7. Duarte Brito & Margarida Catalão‐Lopes, 2019. "Are Larger Merger Synergies Bad News for Consumers? Endogenous Post‐Merger Internal Organization," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(4), pages 1728-1756, October.
    8. Bakaouka, Elpiniki & Escrihuela-Villar, Marc & Ferrarese, Walter, 2024. "Horizontal mergers with Bertrand competition and convex costs," Mathematical Social Sciences, Elsevier, vol. 128(C), pages 60-67.
    9. Kjell Erik Lommerud & Odd Rune Straume & Lars Sørgard & Odd Rune Straume, 2002. "Downstream Merger with Oligopolistic Input Suppliers," CESifo Working Paper Series 733, CESifo.
    10. Hisashi Sawaki, 2015. "Horizontal Mergers Under Asymmetric Information About Synergies," Australian Economic Papers, Wiley Blackwell, vol. 54(3), pages 167-184, September.
    11. Tsuyoshi Toshimitsu & Tetsuya Nakajima, 2021. "On the “merger paradox” in price competition with asymmetric product differentiation," Australian Economic Papers, Wiley Blackwell, vol. 60(1), pages 153-162, March.
    12. Zhou, Wen, 2008. "Endogenous horizontal mergers under cost uncertainty," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 903-912, July.
    13. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    14. Chen, Jiawei, 2009. "The effects of mergers with dynamic capacity accumulation," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 92-109, January.
    15. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2017. "Horizontal mergers and product quality," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(4), pages 1063-1103, November.
    16. Zhu, Jing & Boyaci, Tamer & Ray, Saibal, 2016. "Effects of upstream and downstream mergers on supply chain profitability," European Journal of Operational Research, Elsevier, vol. 249(1), pages 131-143.
    17. Ulus Aysegul & Yildiz Halis M., 2012. "On the Relationship between Tariff Levels and the Nature of Mergers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-40, December.
    18. Luis Gautier & Mahelet G. Fikru, 2024. "Are Big Mergers Welfare Enhancing When There Is Environmental Externality?," Natural Resource Management and Policy, in: Handbook of Merger Control and Environmental Policy, chapter 0, pages 145-173, Springer.
    19. Ana Espínola-Arredondo & Felix Munoz-Garcia & Ae Rin Jung, 2020. "Organic Mergers and Acquisitions," Journal of Industry, Competition and Trade, Springer, vol. 20(1), pages 59-91, March.
    20. Le Pape, Nicolas & Zhao, Kai, 2014. "Horizontal mergers and uncertainty," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 8, pages 1-31.

    More about this item

    Keywords

    Product differentiation; Cleaner technology; Mergers and acquisitions; Emission tax;
    All these keywords.

    JEL classification:

    • L - Industrial Organization
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:resene:v:45:y:2016:i:c:p:65-79. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/505569 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.