DP4040 National versus International Mergers in Unionised Oligopoly

Author(s): Kjell Erik Lommerud, Lars Sørgard, Odd Rune Straume
Publication Date: September 2003
Keyword(s): endogenous merger, merger policy, trade unions, welfare
JEL(s): J51, L13, L41
Programme Areas: Public Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4040

We analyse how the presence of trade unions affects the pattern of mergers in an international oligopoly and the welfare implications thereof. We find that an international merger results in lower wages for all firms. A national merger results in higher wages, highest for the non-merging firms. Using a model of endogenous merger formation, we find that the equilibrium market structure, if it exists, always implies one or more international mergers. Unless products are close substitutes there are more mergers than socially preferred.