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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- Lommerud, K.E. & Straume, O.R. & Sorgard, L., 2000.
"Merger Profitability in Unionized Oligopoly,"
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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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- Neven, Damien J. & Roller, Lars-Hendrik, 2005.
"Consumer surplus vs. welfare standard in a political economy model of merger control,"
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- 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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- Richard L. Fullerton & R. Preston McAfee, 1999. "Auctioning Entry into Tournaments," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 573-605, June.
- 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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