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Merger Profitability in Unionized Oligopoly

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

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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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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  1. Bughin, Jacques, 1999. "The strategic choice of union-oligopoly bargaining agenda," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 1029-1040, October.
  2. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
  3. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
  4. Gokhale, Jagadeesh & Groshen, Erica L & Neumark, David, 1995. "Do Hostile Takeovers Reduce Extramarginal Wage Payments?," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 470-85, August.
  5. Paz Espinosa, Maria & Rhee, Changyong, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 565-88, August.
  6. Javier M. López Cuñat & Miguel González-Maestre, 1999. "- Delegation And Endogenous Mergers In Oligopoly," Working Papers. Serie AD 1999-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  7. 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, vol. 98(2), pages 185-99, May.
  8. McAfee, R Preston & Williams, Michael A, 1992. "Horizontal Mergers and Antitrust Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 181-87, June.
  9. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 397-422, July.
  10. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-39, March.
  11. Nilssen, Tore & Sorgard, Lars, 1998. "Sequential horizontal mergers," European Economic Review, Elsevier, vol. 42(9), pages 1683-1702, November.
  12. Lommerud, Kjell Erik & Sorgard, Lars, 1997. "Merger and product range rivalry," International Journal of Industrial Organization, Elsevier, vol. 16(1), pages 21-42, November.
  13. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
  14. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  15. Ramón Faulí-Oller & Massimo Motta, 1996. "Managerial incentives for takeovers," Working Papers. Serie AD 1996-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  16. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
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