Merger, Product Differentiation, and Trade Policy

Cavagnac, Michel and Cheikbossian, Guillaume (2013) Merger, Product Differentiation, and Trade Policy. TSE Working Paper, n. 13-399

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In a two-stage game with three firms and two countries, we study the profitability of
a domestic merger in the context of an international oligopoly game with differentiated products and in a strategic trade policy environment. In contrast to a completely unregulated economy, we show that the domestic merger under Cournot competition is always profitable to the host country irrespective of the degree of product differentiation. Furthermore, it is also profitable to the competing country - hosting one firm only if products are sufficiently differentiated. Under Bertrand competition the merger is always profitable to both countries independently of the
product range rivalry. But in a strategic trade environment it is more profitable to the country in which the merger occurs than to the other country.

Item Type: Monograph (Working Paper)
Date: April 2013
JEL codes: D43 - Oligopoly and Other Forms of Market Imperfection
F12 - Models of Trade with Imperfect Competition and Scale Economies
F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
L13 - Oligopoly and Other Imperfect Markets
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:35
Last Modified: 07 Mar 2018 13:22

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