The literature on mergers and acquisitions shows that a merger among identical firms does not take place because it is not profitable. This study forms a theoretical framework for understanding mergers among identical firms in a pollution-intensive sector. When a merger occurs the market structure changes and so do optimal environmental policies. This flexibility in policy provides the incentive to merge even if there are no efficiency gains.
BarrettS. (1994b). Strategic environmental policy and international trade. Journal of Public Economics, 54(3), 325–338.
3.
BarrosP.P. (1998). Endogenous mergers and size asymmetry of merger participants. Economics Letters, 60(1), 113–119.
4.
CollieD.R. (2003). Mergers and trade policy under oligopoly. Review of International Economics, 11(1), 55–71.
5.
DasS.P.SenguptaS. (2001). Asymmetric information, bargaining and international mergers. Journal of Economics and Management Strategy, 10(4), 565–590.
6.
De FeoG. (2008). Efficiency gains and mergers. Center for Operations Research and Econometrics Discussion Paper.
7.
DeneckereR.DavidsonC. (1985). Incentives to form coalitions with bertrand competition. RAND Journal of Economics, 16(4), 473–486.
8.
European Environmental Agency/EEA. (2006). Using the market for cost-effective environmental policy: Market based instruments in Europe. EEA Report No. 1.
9.
FarrellJ.ShapiroC. (1990). Horizontal mergers: An equilibrium analysis. The American Economic Review, 80(1), 107–126.
10.
Fauli-OllerR. (2002). Mergers between asymmetric firms: Profitability and welfare. The Manchester School, 70(1), 77–87.
11.
FridolfssonS.StennekJ. (2005). Why mergers reduce profits and raise share prices—A theory of preemptive mergers. Journal of the European Economic Association, 3(5), 1083–1104.
12.
KatsoulacosY.XepapadeasA. (1996). Environmental taxes and market structure. In CarraroC.KatsoulacosY.XepapadeasA. (Eds), Environmental policy and market structure (pp. 3–22). The Netherlands: Dordrecht.
13.
KeenM.LahiriS. (1993). Domestic tax reform and international oligopoly. Journal of Public Economics, 51(1), 55–74.
14.
LahiriS.SymeonidisG. (2007). Piecemeal multilateral environmental policy reforms under asymmetric oligopoly. Journal of Public Economic Theory, 9(5), 885–899.
15.
LevinD. (1990). Horizontal mergers: The 50-percent benchmark. The American Economic Review, 80, 1238–1245.
16.
LommerudK.E.SorgardL. (1997). Merger and product range rivalry. International Journal of Industrial Organization, 16(1), 21–42.
17.
LongN.V.VousdenN. (1995). The effects of trade liberalization on cost-reducing horizontal mergers. Review of International Economics, 3(2), 141–155.
18.
McElroyF.W. (1993). The effects of mergers in markets for differentiated products. Review of Industrial Organization, 8(1), 69–81.
19.
QiuL.D.ZhouW. (2006). International mergers: Incentives and welfare. Journal of International Economics, 68(1), 38–58.
20.
QiuL.D.ZhouW. (2007). Merger waves: A model of endogenous mergers. RAND Journal of Economics, 38(1), 214–226.
21.
RodriguesV. (2001). Endogenous mergers and market structure. International Journal of Industrial Organization, 19(8), 1245–1261.
22.
SalantS.W.SwitzerS.ReynoldsR.J. (1983). Losses from horizontal merger: The effect of an exogenous change in industry structure on Cournot-Nash equilibrium. The Quarterly Journal of Economics, 98(2), 185–199.
