Welfare effects of mergers and multilateral trade liberalization

A. Ray Chaudhuri, H. Benchekroun

Research output: Contribution to journalArticleScientificpeer-review

Abstract

In a two-country model where firms behave à la Cournot, we show that trade liberalization increases (decreases) the social desirability of those mergers that generate sufficiently large (small) reductions in marginal cost. There exists a range of intermediate levels of marginal cost savings such that marginal tariff reductions increase (decrease) the desirability of merger at sufficiently low (high) tariff levels. Moreover, in the neighborhood of free trade, we show that if trade liberalization increases the profitability of a merger, it necessarily also increases its desirability.
Original languageEnglish
Pages (from-to)119-133
JournalReview of International Economics
Volume20
Issue number1
Publication statusPublished - 2012

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multilateral trade
trade liberalization
merger
liberalization
marginal costs
welfare
social desirability
free trade
profitability
cost
savings
firm
effect
tariff

Cite this

Ray Chaudhuri, A., & Benchekroun, H. (2012). Welfare effects of mergers and multilateral trade liberalization. Review of International Economics, 20(1), 119-133.
Ray Chaudhuri, A. ; Benchekroun, H. / Welfare effects of mergers and multilateral trade liberalization. In: Review of International Economics. 2012 ; Vol. 20, No. 1. pp. 119-133.
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Ray Chaudhuri, A & Benchekroun, H 2012, 'Welfare effects of mergers and multilateral trade liberalization', Review of International Economics, vol. 20, no. 1, pp. 119-133.

Welfare effects of mergers and multilateral trade liberalization. / Ray Chaudhuri, A.; Benchekroun, H.

In: Review of International Economics, Vol. 20, No. 1, 2012, p. 119-133.

Research output: Contribution to journalArticleScientificpeer-review

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T1 - Welfare effects of mergers and multilateral trade liberalization

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AU - Benchekroun, H.

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AB - In a two-country model where firms behave à la Cournot, we show that trade liberalization increases (decreases) the social desirability of those mergers that generate sufficiently large (small) reductions in marginal cost. There exists a range of intermediate levels of marginal cost savings such that marginal tariff reductions increase (decrease) the desirability of merger at sufficiently low (high) tariff levels. Moreover, in the neighborhood of free trade, we show that if trade liberalization increases the profitability of a merger, it necessarily also increases its desirability.

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