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Strategic Trade Policy and Merger Profitability

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  • Steffen Huck
  • Kai A. Konrad

Abstract

We study the profitability incentives of 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 here, even though it 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. National merger induces more strategic trade policy, whereas international merger does not.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 948.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_948

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Related research

Keywords: merger incentives; strategic trade policy;

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References

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  1. Lommerud, Kjell Erik & Sørgard, Lars & Straume, Odd Rune, 2001. "Merger Profitability in Unionized Oligopoly," CEPR Discussion Papers 2738, C.E.P.R. Discussion Papers.
  2. Richardson, Martin, 1999. "Trade and Competition Policies: Concordia Discors?," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 649-64, October.
  3. Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," Working Paper Series 515, Research Institute of Industrial Economics.
  4. Steffen Huck & Kai A. Konrad, 2004. "Merger Profitability and Trade Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(1), pages 107-122, 03.
  5. Horn, Henrik & Levinsohn, James A, 2000. "Merger Policies And Trade Liberalization," CEPR Discussion Papers 2459, C.E.P.R. Discussion Papers.
  6. Simon Cowan, 1989. "Trade and Competition Policies for Oligopolies," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 125(3), pages 464-483, September.
  7. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc.
  8. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  9. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
  10. Horn, Henrik & Persson, Lars, 2001. "Endogenous mergers in concentrated markets," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1213-1244, September.
  11. Mark Rysman, 2000. "Competition Policy as Strategic Trade," Papers 0100, Boston University - Industry Studies Programme.
  12. Javier M. López Cuñat & Miguel González-Maestre, 1999. "- Delegation And Mergers In Oligopoly," Working Papers. Serie AD 1999-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  13. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  14. Ziss, Steffen, 2001. "Horizontal mergers and delegation," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 471-492, March.
  15. Steffen Huck & Kai A. Konrad, 2003. "Strategic Trade Policy and the Home Bias in Firm Ownership Structure," CESifo Working Paper Series 892, CESifo Group Munich.
  16. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  17. Barros, Pedro P. & Cabral, Luis, 1994. "Merger policy in open economies," European Economic Review, Elsevier, vol. 38(5), pages 1041-1055, May.
  18. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  19. Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1104-23, November.
  20. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
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Cited by:
  1. James Gaisford & Stefan Lutz, 2007. "A Multi-Product Framework Generating Waves of Mergers and Divestitures," ICER Working Papers 36-2007, ICER - International Centre for Economic Research.
  2. Kjell Erik Lommerud & Odd Rune Straume & Lars Sørgard, 2006. "National versus international mergers in unionized oligopoly," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 212-233, 03.

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