Profitable mergers with endogenous tariffs

Pedro Mendi, Róbert Veszteg

Research output: Contribution to journalArticle

Abstract

In this note, we suggest a link between tariff protection and firms' incentives to engage in a horizontal merger. We consider a Cournot oligopoly with equal, constant marginal costs where firms have to decide on lobbying efforts prior to choosing output. These lobbying efforts will determine whether a prohibitive tariff is introduced. We find that the possibility of lobbying may enlarge the set of mergers that are profitable, even without cost reductions.

Original languageEnglish
Pages (from-to)1-8
Number of pages8
JournalEconomics Bulletin
Volume12
Issue number11
Publication statusPublished - 2007 Dec 1

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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