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A Consumer-Surplus Standard in Merger Approvals, Foreign Direct Investment, and Welfare

Author

Listed:
  • Onur A. Koska

    (Department of Economics, METU)

Abstract
This study scrutinizes the ramifications of a consumer-surplus standard in approvals of mergers & acquisitions (i) on an investor's choice between acquiring a firm's existing assets (via negotiations or auctions) and investing in new assets under both complete and incomplete information; and (ii) on welfare. Any firm acquisition fulfilling the consumer-surplus standard is in the best interest of the investor, who prefers to be well informed on acquisition gains and prefers sequential offers. A local firm appropriates a bigger share from acquisition gains in an auction, and prefers generating information asymmetries. Welfare improves with a larger scope for ex-post firm heterogeneity.

Suggested Citation

  • Onur A. Koska, 2016. "A Consumer-Surplus Standard in Merger Approvals, Foreign Direct Investment, and Welfare," ERC Working Papers 1612, ERC - Economic Research Center, Middle East Technical University, revised Oct 2016.
    • Handle: RePEc:met:wpaper:1612
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    File URL: http://erc.metu.edu.tr/en/system/files/menu/series16/1612.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Onur A. Koska & Ilke Onur & Frank Stähler, 2018. "The scope of auctions in the presence of downstream interactions and information externalities," Journal of Economics, Springer, vol. 125(2), pages 107-136, October.
    2. Koska, Onur A., 2019. "Gains from multinational competition for cross-border firm acquisition," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 13, pages 1-19.

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    More about this item

    Keywords

    Merger Policy; Acquisitions; Greenfield Investment; Welfare; Incomplete Cost Information;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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