Welfare Effect of Mergers and Multilateral Trade Liberalization
Amrita Ray Chaudhuri
affiliation not provided to SSRN
McGill University - Department of Economics
Review of International Economics, Vol. 20, Issue 1, pp. 119-133, 2012
In a two‐country model where firms behave à la Cournot, we show that trade liberalization increases (decreases) the social desirability of those mergers that generate sufficiently large (small) reductions in marginal cost. There exists a range of intermediate levels of marginal cost savings such that marginal tariff reductions increase (decrease) the desirability of merger at sufficiently low (high) tariff levels. Moreover, in the neighborhood of free trade, we show that if trade liberalization increases the profitability of a merger, it necessarily also increases its desirability.
Number of Pages in PDF File: 15Accepted Paper Series
Date posted: January 17, 2012
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