A Consumer-Surplus Standard in Merger Approvals, Foreign Direct Investment, and Welfare

Onur Koska

No 1612, ERC Working Papers from ERC - Economic Research Center, Middle East Technical University

Abstract: This study scrutinizes the ramifications of a consumer-surplus standard in approvals of mergers & acquisitions (i) on an investor's choice between acquiring a firm's existing assets (via negotiations or auctions) and investing in new assets under both complete and incomplete information; and (ii) on welfare. Any firm acquisition fulfilling the consumer-surplus standard is in the best interest of the investor, who prefers to be well informed on acquisition gains and prefers sequential offers. A local firm appropriates a bigger share from acquisition gains in an auction, and prefers generating information asymmetries. Welfare improves with a larger scope for ex-post firm heterogeneity.

Keywords: Merger Policy; Acquisitions; Greenfield Investment; Welfare; Incomplete Cost Information (search for similar items in EconPapers)
JEL-codes: F23 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2016-10, Revised 2016-10
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:met:wpaper:1612

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