Strategic Trade Policy and Merger Profitability
University 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. Konrad
Max 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)
CESifo Working Paper Series No. 948
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, L13working papers series
Date posted: June 11, 2003
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