Trade Policy, Mergers, and Product Differentiation

Cavagnac, Michel and Cheikbossian, Guillaume (2015) Trade Policy, Mergers, and Product Differentiation. Journal of Institutional and Theoretical Economics, 171 (2). pp. 330-354.

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We analyze the welfare effects of mergers in a strategic trade-policy environment. A merger in one country changes the strategic behavior of all firms in the markets, which in turn modifies the strategic interaction between governments in the policy game. Consequently, the results strongly contrast with those obtained in a laissez-faire economy. Under quantity competition, a merger is always profitable to the host country and can also be profitable to the competing country if products are sufficiently differentiated. Under price competition, a merger is always profitable to both countries – but it is more profitable to the host country.

Item Type: Article
Language: English
Date: 2015
Refereed: Yes
Uncontrolled Keywords: Strategic trade policy, mergers, product differentiation, Cournot competition, Bertrand competition
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: 16 Mar 2015 14:51
Last Modified: 24 Jan 2019 00:10

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