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A Mixed GOLE Model of Cross-Border Mergers and Trade

Author

Listed:
  • Hamid Beladi

    (UTSA)

  • Avik Chakrabarti
  • Sugata Marjit

Abstract

We construct a tractable open economy general equilibrium model of a mixed oligopoly. Our model is then applied to capture the incentives for and implications of cross-border horizontal mergers and trade in the presence of a public firm. Absent any possibility of cross-border mergers, an increase in the degree of privatization will result in a shrinking of the extensive margins of trade. Cross-border mergers will mitigate, by aligning specialization toward the direction of comparative advantage, the effect of privatization on the extensive margins of trade. Allowing firms to move sequentially will magnify the effect that cross-border mergers have on the extensive margins of trade: the magnification effect will be larger when the private firms lead than it will be if the private firms follow.Length: 27 pages

Suggested Citation

  • Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2013. "A Mixed GOLE Model of Cross-Border Mergers and Trade," Working Papers 0143eco, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0143eco
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    File URL: http://interim.business.utsa.edu/wps/eco/0002ECO-414-2013.pdf
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    References listed on IDEAS

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    1. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2013. "Privatization and Strategic Mergers across Borders," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 432-446, August.
    2. Hamilton, Jonathan H. & Slutsky, Steven M., 1990. "Endogenous timing in duopoly games: Stackelberg or cournot equilibria," Games and Economic Behavior, Elsevier, vol. 2(1), pages 29-46, March.
    3. Reza Oladi & John Gilbert, 2011. "Monopolistic Competition and North–South Trade," Review of International Economics, Wiley Blackwell, vol. 19(3), pages 459-474, August.
    4. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
    5. repec:bla:reviec:v:10:y:2002:i:4:p:623-44 is not listed on IDEAS
    6. J. Peter Neary, 2007. "Cross-Border Mergers as Instruments of Comparative Advantage," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(4), pages 1229-1257.
    7. Ravi Batra, 2002. "Economics in Crisis: Severe and Logical Contradictions of Classical, Keynesian, and Popular Trade Models," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 623-644, November.
    8. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    9. Ordover, Janusz A & Saloner, Garth & Salop, Steven C, 1990. "Equilibrium Vertical Foreclosure," American Economic Review, American Economic Association, vol. 80(1), pages 127-142, March.
    10. Gianni De Fraja & Paola Valbonesi, 2009. "Mixed Oligopoly: Old and New," Discussion Papers in Economics 09/20, Division of Economics, School of Business, University of Leicester.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Rudy Colacicco, 2015. "Ten Years Of General Oligopolistic Equilibrium: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 29(5), pages 965-992, December.
    2. Kenji Fujiwara, 2015. "Mixed Oligopoly and Privatization in General Equilibrium," Discussion Paper Series 137, School of Economics, Kwansei Gakuin University, revised Dec 2015.
    3. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2013. "Privatization and Strategic Mergers across Borders," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 432-446, August.

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    More about this item

    Keywords

    General Equilibrium; International Trade; Multinational Corporations; Cross-border Merger; Diversification; Comparative Advantage; Privatization; M-GOLE.;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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