An Analysis of the Mode:the Effects of Trade Liberalization on the Incentive s to Merger

Trade liberalizatio n has two main implications for the profitability of potential mergers.First,relat ively inefficient firms in the formerly protected market now become more attract ive as merger partners.Second,mergers involving relatively inefficient firms els ewhere become less attractive,and may fail to materialize altogether,or,if they have already occurred,lead to divestments.In either of the ways,trade liberaliza tion will blaze the latent merger activities.It is natural that not all of merge r activities are socially desirable.