Merger profitability and trade policy

Huck , S.; Konrad, K. A.

doi:10.1111/j.0347-0520.2004.t01-1-00350.x

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Merger profitability and trade policy

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Huck, S., & Konrad, K. A. (2004). Merger profitability and trade policy. The Scandinavian journal of economics, 106(1), 107-122. doi:10.1111/j.0347-0520.2004.t01-1-00350.x.

Cite as: https://hdl.handle.net/11858/00-001M-0000-0023-DB77-C

Abstract

We study the profitability incentives for merger and the endogenous industry structure in a strategic trade policy environment. Merger changes the strategic trade policy equlilibrium. We show that merger can be profitable and welfare enhancing, even though it would not be profitable in a laissez-faire economy. A key element is a change in the governments’ incentives to give subsidies to their local firms. National merger induces more strategic trade policy, whereas international merger does not.