Merger profitability and trade policy

Arbeitspapier

We study the profitability and welfare effects of merger in a strategic trade policy environment. Merger changes the strategic trade policy equilibrium. We show that merger can be profitable and welfare enhancing here, even though it is not profitable in a laissez-faire economy. A key element is the change in the governments’ incentives to give subsidies to their local firms. We apply the results to the merger between Boeing and McDonnell-Douglas, where subsidies are a constant matter of debate. Our theory explains why the merger was profitable for Boeing and McDonnell-Douglas, why Airbus Industries opposed the merger, why the US authorities agreed to the merger, and why the EU competition authorities opposed it.

Object Details

• Alternative title: Fusionen und Handelspolitik
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WZB Discussion Paper ; No. FS IV 01-12

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Auctions ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Oligopoly and Other Imperfect Markets
• Subject: Merger ; strategic trade policy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Huck, Steffen ; Konrad, Kai A.
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (where): Berlin
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/51074
• Last update: 10.03.2025, 11:44 AM CET