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Pedro Mendi and Róbert Veszteg
''Profitable mergers with endogenous tariffs''
( 2007, Vol. 12 No.23 )
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: L1 - Market Structure, Firm Strategy, and Market Performance: General
F1 - Trade: General
Manuscript Received : Sep 10 2007 Manuscript Accepted : Sep 25 2007

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