Abstract |
This paper examines the economic consequences of a horizontal merger between Korean automakers that took place in 1998, with a particular emphasis on export
market behavior. Estimates of structural demand and supply reveal that the merger
enhanced production efficiency of the merged party by 6.3 percent. Simulations, based
on these estimates, indicate that while the merger increased domestic prices, it also
tripled the export volume of the merged party. Moreover, the eects of the merger are
found to dier by auto model according to the model's pre-merger export status. It
is shown that efficiency gains from the merger are likely to increase export volumes
for models that were already exported prior to the merger, and to oset domestic
market power for those that were not exported even after the merger. Finally, the
paper compares the actual merger's eects to those of an alternative counterfactual
merger, nding that the actual merger brought greater benets to producers and fewer
to domestic consumers. |