Merger profitability and trade policy
[Fusionen und Handelspolitik]
We study the profitability and welfare effects of merger in a strategic trade policy environment. Merger changes the strategic trade policy equilibrium. We show that merger can be profitable and welfare enhancing here, even though it is not profitable in a laissez-faire economy. A key element is the change in the governments’ incentives to give subsidies to their local firms. We apply the results to the merger between Boeing and McDonnell-Douglas, where subsidies are a constant matter of debate. Our theory explains why the merger was profitable for Boeing and McDonnell-Douglas, why Airbus Industries opposed the merger, why the US authorities agreed to the merger, and why the EU competition authorities opposed it.
|Date of creation:||2001|
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- Neven, Damien J & Röller, Lars-Hendrik, 2000.
"Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control,"
CEPR Discussion Papers
2620, C.E.P.R. Discussion Papers.
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- Damien J. NEVEN & Lars-Hendrik RÖLLER, 2000. "Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 00.24, Université de Lausanne, Faculté des HEC, DEEP.
- Damien J. Neven & Lars-Hendrik Röller, 2000. "Consumer Surplus vs. Welfare Standard in a Political Economy Model of Merger Control," CIG Working Papers FS IV 00-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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- Lommerud, Kjell Erik & Sørgard, Lars & Straume, Odd Rune, 2001.
"Merger Profitability in Unionized Oligopoly,"
CEPR Discussion Papers
2738, C.E.P.R. Discussion Papers.
- Lommerud, K.E. & Straume, O.R. & Sorgard, L., 2000. "Merger Profitability in Unionized Oligopoly," Papers 9/00, Norwegian School of Economics and Business Administration-.
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- Lommerud, Kjell Erik & Straume, Odd Rune & SÃ¸rgard, Lars, 2000. "Merger Profitability in Unionized Oligopoly," University of California at Santa Barbara, Economics Working Paper Series qt9736w3k9, Department of Economics, UC Santa Barbara.
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- Suchan Chae & Paul Heidhues, 2001. "Nash Bargaining Solution with Coalitions and The Joint Bargaining Paradox," CIG Working Papers FS IV 01-15, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
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NBER Working Papers
1464, National Bureau of Economic Research, Inc.
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- 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.
- Konrad, Kai A., 2000. "Trade contests," Journal of International Economics, Elsevier, vol. 51(2), pages 317-334, August.
- Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
- 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.
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- Keith Head & John Ries, 1997. "International Mergers and Welfare under Decentralized Competition Policy," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 1104-1123, November.
- 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.
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