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Peter Neary, University College Dublin
 

Integrating Trade Theory with Industrial Organization
(based on the paper 'Cross-Border Mergers as Instruments of Comparative Advantage')
wiiw, 26 February 2004, 1 p.m.
 
A two-country model of oligopoly in general equilibrium is used to show how changes in market structure accompany the process of trade liberalisation, suggesting a resolution to a long-standing puzzle in merger theory. The model predicts that bilateral mergers in which low-cost firms buy out higher-cost foreign rivals are profitable under Cournot competition. The model implies that trade liberalisation can trigger international merger waves, in the process encouraging countries to specialise and trade more in accordance with comparative advantage.

Keywords: Comparative advantage; cross-border mergers; GOLE (General Oligopolistic Equilibrium); market integration; merger waves
JEL classification: F10, F12, L13
 
 
 

 
 


 		  


 		  


 
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