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National versus international mergers in unionized oligopoly

  • Kjell Erik Lommerud
  • Odd Rune Straume
  • Lars Sørgard

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.

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Article provided by RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 37 (2006)
Issue (Month): 1 (03)
Pages: 212-233

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Handle: RePEc:bla:randje:v:37:y:2006:i:1:p:212-233
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