Merger Policy to Promote ‘Global Players’? A Simple Model∗

We use a simple framework where firms in two countries serve their respec-tive domestic markets and a world market to analyze under which conditions cost-reducing mergers will be beneficial for the merging firms, the home coun-try, and the world as a whole. For a national merger, the policies enacted by a national merger authority tend to be overly restrictive from a global efficiency perspective. In contrast, all international mergers that benefit the merging firms will be cleared by either a national or a regional regulator, and this laissez-faire approach is also globally efficient. Finally, we derive the properties of the endoge-nous merger equilibrium