Horizontal Mergers, Involuntary Unemployment, and Welfare

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Horizontal Mergers, Involuntary Unemployment, and Welfare

Author Info

Oliver Budzinski () (Department of Environmental and Business Economics, University of Southern Denmark, Campus Esbjerg)
Jürgen-Peter Kretschmer () (Economic Policy Unit, Philipps-University of Marburg)

Additional information is available for the following registered author(s):

Oliver Budzinski

Abstract

Standard welfare analysis of horizontal mergers usually refers to two effects: the anticompetitive market power effect reduces welfare by enabling firms to charge prices above marginal costs, whereas the procompetitive efficiency effect increases welfare by reducing the costs of production (synergies). However, demand-side effects of synergies are usually neglected. We introduce them into a standard oligopoly model of horizontal merger by assuming an (empirically supported) decrease in labour demand due to merger-specific synergies and derive welfare effects. We find that efficiency benefits from horizontal mergers are substantially decreased, if involuntary unemployment exists. However, in full employment economies, demand-side effects remain negligible. Eventually, policy conclusions for merger control are discussed.

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Publisher Info
Paper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200907.

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Length: 22 pages
Date of creation: 2009
Date of revision:
Publication status: Forthcoming in
Handle: RePEc:mar:magkse:200907

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Paper
- Oliver Budzinski & Jürgen-Peter Kretschmer, 2009. "Horizontal Mergers, Involuntary Unemployment, and Welfare," Working Papers 90/09, University of Southern Denmark, Department of Environmental and Business Economics. [Downloadable!]

Find related papers by JEL classification:
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-02-22 (All new papers)
NEP-COM-2009-02-22 (Industrial Competition)
NEP-IND-2009-02-22 (Industrial Organization)
NEP-LAB-2009-02-22 (Labour Economics)
NEP-MIC-2009-02-22 (Microeconomics)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Gersbach, Hans, 2000. "Promoting Product Market Competition to Reduce Unemployment in Europe: An Alternative Approach?," Kyklos, Blackwell Publishing, vol. 53(2), pages 117-33.
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Other versions:
- Joseph A. Clougherty & Tomaso Duso, 2008. "The Impact of Horizontal Mergers on Rivals: Gains to Being Left Outside a Merger," CIG Working Papers SP II 2008-17r, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
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Other versions:
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Other versions:
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Other versions:
- Joseph Farrell and Carl Shapiro., 1988. "Horizontal Mergers: An Equilibrium Analysis," Economics Working Papers 8880, University of California at Berkeley.
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This page was last updated on 2009-11-25.

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