An Analytical Approach for Policy Coordination

This chapter introduces a framework for analyzing the cooperative policy setting between the merger control authority (MCA) and environmental protection agency (EPA). Currently, the United States and EU follow a noncooperative policy framework where MCA and EPA independently set policies. The model developed in this chapter identifies inefficiencies associated with noncooperative scenarios. By establishing a cooperative equilibrium, the analysis demonstrates that there exists an industry output level post-merger that maximizes joint welfare when MCA and EPA coordinate their policies. The policy implication suggests a shift toward cooperation between MCA and EPA, emphasizing the potential for welfare gains through aligned decision-making. This cooperative approach would require a reevaluation of the existing noncooperative framework and could lead to more balanced outcomes in terms of economic and environmental welfare.