Profitable mergers with endogenous tariffs

Pedro Mendi, Róbert Veszteg

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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
JournalEconomics Bulletin
Volume12
Issue number22
Publication statusPublished - 2007 Sep 25

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ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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