DP2738 Merger Profitability in Unionized Oligopoly

Author(s): Kjell Erik Lommerud, Lars Sørgard, Odd Rune Straume
Publication Date: March 2001
Keyword(s): Endogenous Wages, Merger Profitability, Trade Unions
JEL(s): J51, L13, L41
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2738

We examine how a merger affects wages of unionized labour and, in turn, the profitability of a merger under Cournot competition in differentiated products. If unions are plant-specific, we find that a merger is more profitable than in a corresponding model with exogenous wages. In contrast to the received literature, we find that it can be more profitable to take part in a merger than to be an outsider. For firm-specific unions, on the other hand, results are reversed.