Environmental policy helping antitrust decisions: Socially excessive and insufficient merger approvals

Pak Sing Choi, Ana Espínola-Arredondo, Félix Muñoz-García

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

This paper considers firms’ incentives to merge under imperfect competition, where we allow for product differentiation, cost asymmetries, and pollution intensities (green and brown goods). We first analyze mergers in the absence of environmental regulation, showing that mergers induce an output shift towards the lowest cost firm. When emission fees are introduced, however, firms also consider their relative pollution intensities, potentially reverting the above output shift. We show that socially excessive mergers can arise when firms shift output to the more cost-efficient firm which may cause more pollution. In contrast, socially insufficient mergers can arise if output shifts reduce pollution.

Original languageEnglish
Article number101267
JournalResource and Energy Economics
Volume67
DOIs
StatePublished - Feb 2022

Keywords

  • Antitrust authorities
  • Cost asymmetry
  • Emission fees
  • Environmental regulation
  • Pollution intensity
  • Product differentiation
  • Socially excessive/insufficient mergers

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