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Strategic Trade Policy and Merger Profitability

  • Steffen Huck
  • Kai A. Konrad

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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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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  1. Huck, Steffen & Konrad, Kai A., 2001. "Merger profitability and trade policy
    [Fusionen und Handelspolitik]
    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 01-12, Social Science Research Center Berlin (WZB).
  2. Simon Cowan, 1989. "Trade and Competition Policies for Oligopolies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(3), pages 464-483, September.
  3. 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.
  4. Lommerud, Kjell Erik & Sørgard, Lars & Straume, Odd Rune, 2001. "Merger Profitability in Unionized Oligopoly," CEPR Discussion Papers 2738, C.E.P.R. Discussion Papers.
  5. Horn, Henrik & Levinsohn, James A, 2000. "Merger Policies And Trade Liberalization," CEPR Discussion Papers 2459, C.E.P.R. Discussion Papers.
  6. Horn, Henrik & Persson, Lars, 1996. "Endogenous Mergers in Concentrated Markets," CEPR Discussion Papers 1544, C.E.P.R. Discussion Papers.
  7. Horn, Henrik & Persson, Lars, 1999. "The Equilibrium Ownership of an International Oligopoly," CEPR Discussion Papers 2302, C.E.P.R. Discussion Papers.
  8. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc.
  9. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
  10. 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.
  11. Huck, Steffen & Konrad, Kai A., 2003. "Strategic trade policy and the home bias in firm ownership structure," Japan and the World Economy, Elsevier, vol. 15(3), pages 299-305, August.
  12. 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.
  13. 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).
  14. Barros, Pedro P. & Cabral, Luis, 1994. "Merger policy in open economies," European Economic Review, Elsevier, vol. 38(5), pages 1041-1055, May.
  15. Ziss, Steffen, 2001. "Horizontal mergers and delegation," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 471-492, March.
  16. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
  17. 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.
  18. Richardson, Martin, 1999. "Trade and Competition Policies: Concordia Discors?," Oxford Economic Papers, Oxford University Press, vol. 51(4), pages 649-64, October.
  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. Mark Rysman, 2000. "Competition Policy as Strategic Trade," Papers 0100, Boston University - Industry Studies Programme.
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