GEP Research Paper 01/14
Tariffs and Mergers in an Integrated Market
Rod Falvey
Abstract
The last few decades have seen a significant reduction in trade barriers, which has brought the international aspects of competition policies into greater prominence. In this paper we explore the effects of tariffs on the profitability and welfare consequences of mergers in a simple model of the integrated world market for a single homogeneous product in which firms differ in their levels of efficiency. The results indicate that trade liberalisation is likely to encourage mergers involving the least efficient firm in the liberalising economy. Whether such mergers are likely to be permitted by national competition authorities depends on the identity of both merger participants.
Issued in August 2001.
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