Trade liberalization and international Mergers: The case of barley malting in North America

摘要

As free trade policy merges formerly distinct markets characterized by stable Cournot oligopolies and having similar cost structures, additional incentives are created for mergers within the newly combined industry that affect the gains from free trade We use a Cournot-Nash oligopoly model to examine the incentives for malting company mergers following Canadian-U.S. free trade agreement. Mergers reduce free trade gains to malt consumers and malt barley producers while producer surplus in the malting industry increases. Overall, mergers increase the total gains from free trade beyond those without mergers.