Environmental policy helping antitrust decisions: Socially excessive and insufficient merger approvals

Pak-Sing Choi, Ana Espinola-Arredondo and Felix Munoz-Garcia

Resource and Energy Economics, 2022, vol. 67, issue C

Abstract: This paper considers firms’ incentives to merge under imperfect competition, where we allow for product differentiation, cost asymmetries, and pollution intensities (green and brown goods). We first analyze mergers in the absence of environmental regulation, showing that mergers induce an output shift towards the lowest cost firm. When emission fees are introduced, however, firms also consider their relative pollution intensities, potentially reverting the above output shift. We show that socially excessive mergers can arise when firms shift output to the more cost-efficient firm which may cause more pollution. In contrast, socially insufficient mergers can arise if output shifts reduce pollution.

Keywords: Socially excessive/insufficient mergers; Product differentiation; Cost asymmetry; Pollution intensity; Emission fees; Antitrust authorities; Environmental regulation (search for similar items in EconPapers)
JEL-codes: G34 H23 L41 Q50 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:67:y:2022:i:c:s092876552100052x

DOI: 10.1016/j.reseneeco.2021.101267

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