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Horizontal Mergers, Involuntary Unemployment, and Welfare Author info | Abstract | Publisher info | Download info | Related research | Statistics Oliver Budzinski () (Department of Environmental and Business Economics, University of Southern Denmark)
Jürgen-Peter Kretschmer () (Economic Policy Unit, Philipps-University of Marburg, Germany)
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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 ef-fect increases welfare by reducing the costs of production (synergies). How-ever, 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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Paper provided by University of Southern Denmark, Department of Environmental and Business Economics in its series Working Papers with number
90/09.
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Length: 35 pages
Date of creation: Apr 2009Date of revision:
Handle: RePEc:sdk:wpaper:90Contact details of provider: Postal: Niels Bohrs Vej 9, 6700 Esbjerg Phone: (+45) 6550 1000 Fax: (+45) 6550 1091 Email: Web page: http://www.sam.sdu.dk/ime More information through EDIRC
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Keywords: Horizontal mergers ; involuntary unemployment ; efficiency defense ; oligopoly ; competition ; Other versions of this item:
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
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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.: Oliver Budzinski, 2008.
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Joseph Farrell and Carl Shapiro., 1988.
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