The attempted merger between General Electric and Honeywell, a case study of transatlantic conflict

Damien Neven

No 06-2005, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: \cf1\f1 This paper analyzes how State aid affects and distorts competition and trade within and across jurisdictions. We identify the circumstances in which state aid is likely to involve the largest distortions. In the context of the paper distortion of competition" is interpreted as the effect on rivals\f2\rquote\f1 profits. We consider three types of state intervention, namely subsidies which affect marginal cost, entry and quality and analyse whether particular market characteristics are robust indicators of the magnitude of the distortions. We obtain the following results: (i) it appears that concentration is a fairly robust indicator; (ii) A high degree of substitution across differentiated products is not a robust indicator of the magnitude of the distortions. Its effect depends on the type of state intervention; (iii) The substitution among domestic products may have opposite effects respectively on domestic and foreign firms. In particular, when the market is not concentrated and state aid takes the form of a production subsidy, a stronger substitution among domestic products will reduce the distortions felt by the foreign firm (but increase that felt by domestic rivals); Finally, (iv) the paper demonstrates that the impact of selective State aid on market prices and competitors can depend on the particular characteristics of the market JEL Classification numbers: K21; L10; L40

Keywords: State aids; EU Antitrust; distortions of competition (search for similar items in EconPapers)
Pages: 31 pages
Date: 2005-11-01
References: View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIWP06-2005.pdf

Related works:
Journal Article: THE ATTEMPTED MERGER BETWEEN GENERAL ELECTRIC AND HONEYWELL: A CASE STUDY OF TRANSATLANTIC CONFLICT (2005)
Working Paper: The attempted merger between General Electric and Honeywell - A case study of transatlantic conflict (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heiwp06-2005

Access Statistics for this paper

More papers in IHEID Working Papers from Economics Section, The Graduate Institute of International Studies Contact information at EDIRC.
Bibliographic data for series maintained by Dorina Dobre ().