Trade liberalisation, market structure and the incentive to merge

Martin Chalkley, Geoff Stewart

    Research output: Working paperDiscussion paper

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    Abstract

    In this paper we consider whether a movement towards freer international trade generates incentives for firms to merge and if so what forms of merger are most profitable. In a linear Cournot framework we show that a reduction in trade costs may, but will not necessarily, encourage mergers. Both market structure and the level to which trade costs fall are shown to play a decisive role. Domestic mergers will be encouraged only if the product market is not highly concentrated and trade costs fall below a threshold level. International mergers can be encouraged in any market structure, and are generally more profitable than domestic mergers.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2004

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.174
    ISSN (Print)1473-236X

    Keywords

    • Merger
    • International trade
    • Oligopoly

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  • Cite this

    Chalkley, M., & Stewart, G. (2004). Trade liberalisation, market structure and the incentive to merge. (Dundee Discussion Papers in Economics; No. 174). University of Dundee.