We show the effects of a strategic tax/subsidy policy on the
incentiveforamergerunderCournotoligopolywithconsumption
externality. The incentive for a merger is higher under the
tax/subsidy policy compared to no tax policy. Thus, we point
towards a new factor, viz., strategic tax policy, for increasing the
incentive for a merger that has been ignored in the literature.
Further, a merger may benefit the consumers and the society in
the presence of a strategic tax/subsidy policy depending on the
marginalsocialcostofthepublicfund