Post by Sapphire Capital on Jul 12, 2008 20:51:21 GMT 4
Welfare Effect of Mergers and Trade Liberalization
AMRITA RAY CHAUDHURI
Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg Law and Economics Center (TILEC)
HASSAN BENCHEKROUN
McGill University - Department of Economics
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January 2008
CentER Discussion Paper No. 2008-19
TILEC Discussion Paper No. 2008-009
Abstract:
In a two-country model where firms behave à la Cournot, we show that marginal and non-marginal trade liberalization have different effects on the social desirability of horizontal mergers. Marginal tariff reductions increase (decrease) the desirability of merger at sufficiently low (high) tariff levels. In the neighborhood of free trade, for sufficiently low cost savings from merger, trade liberalization increases the desirability of merger whilst decreasing the profitability, implying that mergers should be actively encouraged by competition authorities. Furthermore, we identify ranges of tariff levels for which, if trade liberalization increases (decreases) the desirability of merger, it necessarily increases (decreases) its profitability.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1095672_code629430.pdf?abstractid=1095672&mirid=4
AMRITA RAY CHAUDHURI
Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg Law and Economics Center (TILEC)
HASSAN BENCHEKROUN
McGill University - Department of Economics
--------------------------------------------------------------------------------
January 2008
CentER Discussion Paper No. 2008-19
TILEC Discussion Paper No. 2008-009
Abstract:
In a two-country model where firms behave à la Cournot, we show that marginal and non-marginal trade liberalization have different effects on the social desirability of horizontal mergers. Marginal tariff reductions increase (decrease) the desirability of merger at sufficiently low (high) tariff levels. In the neighborhood of free trade, for sufficiently low cost savings from merger, trade liberalization increases the desirability of merger whilst decreasing the profitability, implying that mergers should be actively encouraged by competition authorities. Furthermore, we identify ranges of tariff levels for which, if trade liberalization increases (decreases) the desirability of merger, it necessarily increases (decreases) its profitability.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1095672_code629430.pdf?abstractid=1095672&mirid=4