These are some questions that I posed to Harry Clarke as comments to his article / blog "More on Rio, BHP-Billiton & Chinalco’s rejected love", or reply to his questions for me, 9/06/2009, http://www.harryrclarke.com/2009/06/09/more-on-rio-bhp-billiton-chinalcos-rejected-love/
I have commented on this article before. But Harry asked me to demonstrate my argument agaist his argument that the use of the Cournot Nash model is right in this case. Here are my questions.
hc, some quick points to discuss with you. First how do you define national interest clearly so that whoever is reviewing foreign investments can apply it consistently across the board?
Second, is your argument of monopoly power by Australia correct or informed as it should be? Both Rio and BHP say they would market their shares of iron ore production separately that seems to contradict your argument.
Third, is either Rio or BHP wholly owned by Australians, so Australia has the monopoly power? If they are not, why an increase in Chinalco's share in Rio would reduce any monopoly power that Australia has?
In terms of models, why is the Cournot-Nash story right in this case? Isn't the case that that model assumes perfect competition on the demand side? If that is the case, is that consistent with your argument of monopsony power demand? If you have monoply powers on both the supply and demand side, why is that model applicable?