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Strategic Trade Policy and Merger ProfitabilitySteffen HuckUniversity College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA) Kai A. KonradMax Planck Institute for Tax Law and Public Finance; Social Science Research Center Berlin (WZB); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA) May 2003 CESifo Working Paper Series No. 948 Abstract: We study the profitability incentives of mergers and the endogenous industry structure in a strategic trade policy environment. Mergers change the strategic trade policy equlilibrium. We show here that mergers can be profitable and welfare-enhancing, even though they would not be profitable in a laissez-faire economy. A key element is the change in the governments' incentives to give subsidies to their local firms. A national merger induces more strategic trade policy, whereas an international merger does not.
Number of Pages in PDF File: 26 Keywords: Merger Incentives, Strategic Trade Policy JEL Classification: D43, D44, F12, L11, L13 working papers seriesDate posted: June 11, 2003Suggested CitationContact Information
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