Profitable mergers with endogenous tariffs

Pedro Mendi and Róbert Veszteg

Economics Bulletin, 2007, vol. 12, issue 23, 1-8

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.

JEL-codes: F1 L1 (search for similar items in EconPapers)
Date: 2007-09-25
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