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Horizontal Mergers With Capital Adjustment: Workers Cooperatives And The Merger Paradox

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  • Flavio DELBONO
  • Luca LAMBERTINI

Abstract

We study the incentives towards horizontal merger among firms when the amount of capital is the strategic variable. We focus on workers' cooperatives, but our conclusions apply also to employment-constrained profit maximizers. Within a simple oligopoly model, we prove that the horizontal merger, for any merger size, is: (i) privately efficient for insiders as well as for outsiders; (ii) socially efficient if market size is large enough, even in the case of merger to monopoly.

Suggested Citation

  • Flavio DELBONO & Luca LAMBERTINI, 2016. "Horizontal Mergers With Capital Adjustment: Workers Cooperatives And The Merger Paradox," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 87(4), pages 529-539, December.
    • Handle: RePEc:bla:annpce:v:87:y:2016:i:4:p:529-539
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    References listed on IDEAS

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    1. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
    2. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    3. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    4. Flavio DELBONO & Carlo REGGIANI, 2013. "Cooperative Firms And The Crisis: Evidence From Some Italian Mixed Oligopolies," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 84(4), pages 383-397, December.
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    Cited by:

    1. Flavio Delbono, 2016. "Le cooperative di produzione e la stabilit? occupazionale," QUADERNI DI ECONOMIA DEL LAVORO, FrancoAngeli Editore, vol. 2016(105), pages 166-177.
    2. Delbono, Flavio & Lanzi, Diego & Reggiani, Carlo, 2023. "Workers’ firm in mixed duopoly," Economic Modelling, Elsevier, vol. 122(C).
    3. Gamal Atallah, 2015. "Multi-Firm Mergers with Leaders and Followers," Working Papers E1501E, University of Ottawa, Department of Economics.
    4. Manel Antelo & David Peón, 2019. "On Cooperation Through Alliances and Mergers," Journal of Industry, Competition and Trade, Springer, vol. 19(2), pages 263-279, June.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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