Footloose foreign firm and profitable domestic merger

Hamid Beladi and Arijit Mukherjee

Journal of Economic Behavior & Organization, 2012, vol. 83, issue 2, 186-194

Abstract: We provide a new explanation for a profitable horizontal merger between Cournot oligopolists with symmetric constant returns to scale technologies and homogeneous goods. We show that a merger can be profitable if it prevents a foreign firm from undertaking FDI. Our result is due to the effect of a merger on the foreign firm's strategic investment decision, which is different from the well-known factors, such as the synergic benefit, product differentiation and vertical pricing, which are extensively discussed in the literature. A profitable domestic merger in our analysis reduces domestic welfare.

Keywords: Merger; Foreign direct investment (search for similar items in EconPapers)
JEL-codes: F21 F23 L13 L22 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:83:y:2012:i:2:p:186-194

DOI: 10.1016/j.jebo.2012.05.007

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