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Merger Profitability in Unionized Oligopoly

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  • Lommerud, Kjell Erik
  • Straume, Odd Rune
  • Sørgard, Lars

Abstract

We examine how a merger a ffects wages of unionized labour and, in turn, the profitability of a merger under both Cournot and Bertrand competition. 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 totake partin amergerthan being an outsider. For firm-specific unions, on the other hand, results are reversed.

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Bibliographic Info

Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt9736w3k9.

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Date of creation: 02 May 2000
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Handle: RePEc:cdl:ucsbec:qt9736w3k9

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Keywords: mergerprofitability; trade unions; endogenous wages;

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References

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  1. Javier M. López Cuñat & Miguel González-Maestre, 1999. "- Delegation And Endogenous Mergers In Oligopoly," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1999-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Jagadeesh Gokhale & Erica L. Groshen & David Neumark, 1993. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," NBER Working Papers 4346, National Bureau of Economic Research, Inc.
  3. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(385), pages 121-39, March.
  4. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, Elsevier, vol. 42(7), pages 1251-1267, July.
  5. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 59(2), pages 197-216, April.
  6. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(398), pages 1123-42, December.
  7. Bughin, Jacques, 1999. "The strategic choice of union-oligopoly bargaining agenda," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 17(7), pages 1029-1040, October.
  8. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, American Economic Association, vol. 75(1), pages 219-27, March.
  9. Ramón Faulí-Oller & Massimo Motta, 1996. "Managerial incentives for takeovers," Working Papers. Serie AD, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) 1996-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  10. Nilssen, Tore & Sorgard, Lars, 1998. "Sequential horizontal mergers," European Economic Review, Elsevier, Elsevier, vol. 42(9), pages 1683-1702, November.
  11. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(2), pages 185-99, May.
  12. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 40(2), pages 181-87, June.
  13. Paz Espinosa, Maria & Rhee, Changyong, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 104(3), pages 565-88, August.
  14. Lommerud, Kjell Erik & Sorgard, Lars, 1997. "Merger and product range rivalry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 16(1), pages 21-42, November.
  15. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 6(3), pages 397-422, July.
  16. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, Elsevier, vol. 24(3-4), pages 217-234, May.
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Citations

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Cited by:
  1. Steffen Huck & Kai A. Konrad, 2003. "Strategic Trade Policy and Merger Profitability," CESifo Working Paper Series, CESifo Group Munich 948, CESifo Group Munich.
  2. Huck, Steffen & Konrad, Kai A., 2001. "Merger profitability and trade policy," Discussion Papers, Research Unit: Market Processes and Governance, Social Science Research Center Berlin (WZB) FS IV 01-12, Social Science Research Center Berlin (WZB).
  3. Lommerud, Kjell Erik & Straume, Odd Rune & Sorgard, Lars, 2005. "Downstream merger with upstream market power," European Economic Review, Elsevier, Elsevier, vol. 49(3), pages 717-743, April.
  4. An Liu & Inge Noback, 2011. "Determinants of regional female labour market participation in the Netherlands," The Annals of Regional Science, Springer, Springer, vol. 47(3), pages 641-658, December.
  5. Kjell Erik Lommerud & Odd Rune Straume & Lars Sørgard, 2002. "Downstream Merger with Oligopolistic Input Suppliers," CESifo Working Paper Series, CESifo Group Munich 733, CESifo Group Munich.
  6. Straume, Odd Rune, 2003. "International mergers and trade liberalisation: implications for unionised labour," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 21(5), pages 717-735, May.

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