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Profitable mergers with endogenous tariffs

Author

Listed:
  • Pedro Mendi

    (Universidad de Navarra)

  • Róbert Veszteg

    (Universidad de Navarra)

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.

Suggested Citation

  • Pedro Mendi & Róbert Veszteg, 2007. "Profitable mergers with endogenous tariffs," Economics Bulletin, AccessEcon, vol. 12(23), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-07l10021
    as

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    File URL: http://www.accessecon.com/pubs/EB/2007/Volume12/EB-07L10021A.pdf
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    References listed on IDEAS

    as
    1. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    2. Davidson, Carl & Mukherjee, Arijit, 2007. "Horizontal mergers with free entry," International Journal of Industrial Organization, Elsevier, vol. 25(1), pages 157-172, February.
    3. Pedro Mendi & Róbert F. Veszteg, 2007. "Sustainability of Collusion: Evidence from the Late 19th Century Basque Iron and Steel Industry," Faculty Working Papers 04/07, School of Economics and Business Administration, University of Navarra.
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    Cited by:

    1. Pedro Mendi & Róbert F. Veszteg, 2009. "Sustainability of collusion: evidence from the late 19th century basque iron and steel industry," Investigaciones Economicas, Fundación SEPI, vol. 33(3), pages 385-405, September.

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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • F1 - International Economics - - Trade

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