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}
This paper captures the role of the vertical structure
in the incentives for and implications of cross-border horizontal mergers.
}
Vertical integration acts as a foreclosing device
reducing upstream competition and hence raising the input price for the
disintegrated downstream rivals.
}
Gains from cross-border mergers, attributed to the
vertical structure of an industry, can vary with the relative market
concentration between countries.
}
Such gains rise if competition in the completely
disintegrated market declines.
}
A target of cross-border merger, in a vertically
related industry, is identified through an interaction between relative
market concentration and relative cost efficiency.
}
A merger between a high-cost and a low-cost firm
increases efficiency by eliminating the high-cost firm and raises price by
increasing concentration.
}
Cross-border mergers will be triggered by a relatively
cost-efficient disintegrated foreign firm taking over a disintegrated
domestic firm when pre-merger competition among the disintegrated firms is
relatively intense but, otherwise, the initial target will be a vertically
integrated firm.
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