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Horizontal merger under strategic tax policy

Chih-Chen Liu, Arijit Mukherjee and Leonard F.S. Wang

Economics Letters, 2015, vol. 136, issue C, 184-186

Abstract: In a Cournot oligopoly with consumption externality, we show that the presence of a strategic tax policy increases the incentive for a horizontal merger compared to the situation with no tax policy. Thus, we point towards a new factor, viz., strategic tax policy, for increasing the incentive for a horizontal merger that has been ignored in the existing literature. In contrast to the usual belief, we also show that a horizontal merger may benefit the consumers and increase social welfare.

Keywords: Merger; Tax policy; Social welfare (search for similar items in EconPapers)
JEL-codes: D43 L13 L51 (search for similar items in EconPapers)
Date: 2015
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