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Strategic Trade Policy and Merger Profitability

Steffen Huck
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 Intellectual Property, Competition & Tax Law; Social Science Research Center Berlin (WZB); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR); 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.

Keywords: Merger Incentives, Strategic Trade Policy

JEL Classifications: D43, D44, F12, L11, L13

Working Paper Series

Date posted: June 11, 2003 ; Last revised: August 17, 2004

Suggested Citation

Huck, Steffen and Konrad, Kai A., Strategic Trade Policy and Merger Profitability (May 2003). CESifo Working Paper Series No. 948. Available at SSRN: http://ssrn.com/abstract=414040

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Contact Information

Kai A. Konrad (Contact Author) Max Planck Institute for Intellectual Property, Competition & Tax Law ( email ) Marstallplatz 1 Munich 80539 Germany HOME PAGE: http://www.ip.mpg.de/ww/en/pub/organization/ins_management/directors/prof__dr__kai_a__konrad.cfm
Social Science Research Center Berlin (WZB) ( email ) Reichpietschufer 50 Berlin 10785 Germany HOME PAGE: http://www.wzb.eu/mp/mps/people/kai_konrad.en.htm
CESifo (Center for Economic Studies and Ifo Institute for Economic Research) Poschinger Str. 5 Munich 81679 Germany
Centre for Economic Policy Research (CEPR) 90-98 Goswell Road London EC1V 7RR United Kingdom
Institute for the Study of Labor (IZA) P.O. Box 7240 Bonn 53072 Germany
Steffen Huck University College London - Department of Economics ( email ) Gower Street London WC1E 6BT WC1E 6BT United Kingdom +44 207 679 5895 (Phone) +44 207 916 2774 (Fax) HOME PAGE: http://www.ucl.ac.uk/~uctpshu/
CESifo (Center for Economic Studies and Ifo Institute for Economic Research) Poschinger Str. 5 DE-81679 Munich Germany
Institute for the Study of Labor (IZA) P.O. Box 7240 D-53072 Bonn Germany