Mergers between local public firms

Juan Bárcena-Ruiz and María Begoña Garzón

The North American Journal of Economics and Finance, 2020, vol. 51, issue C

Abstract: We consider a country made up of two regions, where each region owns a local public firm and a domestic private one. A national authority decides whether or not to merge the two local public firms. The result depends on whether the goods produced by the firms are homogeneous, substitutes or complements. We find that if the two local public firms produce the same good, the national authority is indifferent as to whether to merge or not. When local public firms produce different goods two cases arise. First, if the firms in each region produce homogeneous goods the national authority merges the two local public firms when the goods are complements, independent in demand and weak substitutes. Second, if the firms in each region produce heterogeneous goods the national authority merges the two local public firms only when the goods are close complements. Therefore, there is greater scope for mergers in the former case than in the later.

Keywords: Merger; State corporation; Multiproduct firms; Mixed oligopoly (search for similar items in EconPapers)
JEL-codes: G34 L22 L32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940818302729

DOI: 10.1016/j.najef.2018.10.004

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