Cross-border mergers as instruments of comparative advantage

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Title: Cross-border mergers as instruments of comparative advantage
Authors: Neary, J. Peter
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Date: 1-Mar-2004
Abstract: A two-country model of oligopoly in general equilibrium is used to show how changes in market structure accompany the process of trade and capital market liberalisation. The model predicts that bilateral mergers in which low-cost firms buy out higher-cost foreign rivals are profitable under Cournot competition. With symmetric countries, welfare may rise or fall, though the distribution of income always shifts towards profits. 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.
Funding Details: European Commission
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: Comparative advantage;Cross-border mergers;GOLE (General Oligopolistic Equilibrium);Market integration;Merger waves
Subject LCSH: Competition, Imperfect
Comparative advantage (International trade)
Consolidation and merger of corporations
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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