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Merger Profitability and Trade Policy
Author(s) -
Huck Steffen,
Konrad Kai A.
Publication year - 2004
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.0347-0520.2004.t01-1-00350.x
Subject(s) - profitability index , incentive , subsidy , economics , welfare , commercial policy , element (criminal law) , international economics , international trade , industrial organization , market economy , finance , political science , law
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.