IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Horizontal Mergers, Involuntary Unemployment, and Welfare

  • Oliver Budzinski


    (Department of Environmental and Business Economics, University of Southern Denmark)

  • Jürgen-Peter Kretschmer


    (Economic Policy Unit, Philipps-University of Marburg, Germany)

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: First version, 2009-04
Download Restriction: no

Paper provided by University of Southern Denmark, Department of Environmental and Business Economics in its series Working Papers with number 90/09.

in new window

Length: 35 pages
Date of creation: Apr 2009
Date of revision:
Handle: RePEc:sdk:wpaper:90
Contact details of provider: Postal:
Niels Bohrs Vej 9, 6700 Esbjerg

Phone: (+45) 6550 1000
Fax: (+45) 6550 1091
Web page:

More information through EDIRC

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.:

as in new window
  1. d’ASPREMONT, C. & DOS SANTOS FERREIRA, R. & GERARD-VARET, L.-A., 1984. "Oligopoly and involuntary unemployment," CORE Discussion Papers 1984008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. David Margolis, 2006. "Should Employment Authorities Worry About Mergers and Acquisitions ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00111969, HAL.
  3. Dennis W. Carlton, 2007. "Does Antitrust Need to be Modernized?," EAG Discussions Papers 200703, Department of Justice, Antitrust Division.
  4. Ronald W. Cotterill & James Brock, 1993. "Antitrust Policy," Issue Papers 02, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  5. Kenneth Heyer, 2006. "Welfare Standards and Merger Analysis: Why not the Best?," EAG Discussions Papers 200608, Department of Justice, Antitrust Division.
  6. Mark J. Garmaise & Tobias J. Moskowitz, 2006. "Bank Mergers and Crime: The Real and Social Effects of Credit Market Competition," Journal of Finance, American Finance Association, vol. 61(2), pages 495-538, 04.
  7. Farrell, J. & Shapiro, C., 1988. "Horizontal Mergers: An Equilibrium Analysis," Papers 17, Princeton, Woodrow Wilson School - Discussion Paper.
  8. Farrell, Joseph & Shapiro, Carl, 2000. "Scale Economies and Synergies in Horizontal Merger Analysis," Department of Economics, Working Paper Series qt96z174x1, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  9. Gersbach, Hans, 2000. "Promoting Product Market Competition to Reduce Unemployment in Europe: An Alternative Approach?," Kyklos, Wiley Blackwell, vol. 53(2), pages 117-33.
  10. Clougherty, Joseph A. & Duso, Tomaso, 2008. "The Impact of Horizontal Mergers on Rivals: Gains to Being Left Outside a Merger," CEPR Discussion Papers 6867, C.E.P.R. Discussion Papers.
  11. Paolo Fulghieri & Laurie Simon Hodrick, 2006. "Synergies and Internal Agency Conflicts: The Double-Edged Sword of Mergers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(3), pages 549-576, 09.
  12. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521816632, November.
  13. Budzinski, Oliver, 2007. "Monoculture versus diversity in competition economics," IBES Diskussionsbeiträge 158, University of Duisburg-Essen, Institute of Business and Economic Studie (IBES).
  14. d'ASPREMONT, Claude & DOS SANTOS FERREIRA, Rodolphe & GERARD-VARET, Louis-André, . "Unemployment in an extended Cournot oligopoly model," CORE Discussion Papers RP 843, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  15. Claude d'Aspremont & Rodolphe Dos Santos Ferreira & Louis-André Gérard-Varet, 1990. "On Monopolistic Competition and Involuntary Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(4), pages 895-919.
  16. K. P. Upadhyaya & F. G. Mixon, 2003. "Merger activity and unemployment in the USA," Applied Economics Letters, Taylor & Francis Journals, vol. 10(11), pages 705-707.
  17. Ken Heyer, 2006. "Welfare Standards and Merger Analysis: Why Not the Best?," CPI Journal, Competition Policy International, vol. 2.
  18. d’ASPREMONT, Cl. & DOS SANTOS FERREIRA, R. & GERARD-VARET, L.-A., 1988. "Unemployment in a Cournot oligopoly model with Ford effects," CORE Discussion Papers 1988018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  19. repec:hal:journl:halshs-00202292 is not listed on IDEAS
  20. repec:hal:journl:halshs-00111969 is not listed on IDEAS
  21. Wolfgang Kerber, 2009. "Should Competition Law Promote Efficiency? Some Reflections of an Economist on the Normative Foundations of Competition Law," Chapters, in: Economic Theory and Competition Law, chapter 6 Edward Elgar Publishing.
  22. Michelle Haynes & Steve Thompson, 1999. "Merger Activity and Employment: Evidence from the UK Mutual Sector," Empirica, Springer, vol. 26(1), pages 39-54, March.
  23. Alberto Behar & James Hodge, 2007. "The employment effects of mergers in a declining industry: the case of South African gold mining," Economics Series Working Papers 335, University of Oxford, Department of Economics.
  24. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, November.
  25. Gugler, Klaus & Yurtoglu, B. Burcin, 2004. "The effects of mergers on company employment in the USA and Europe," International Journal of Industrial Organization, Elsevier, vol. 22(4), pages 481-502, April.
  26. David Margolis, 2006. "Should Employment Authorities Worry About Mergers and Acquisitions ?," Working Papers 2006-03, Centre de Recherche en Economie et Statistique, revised Mar 2006.
  27. 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, Oxford University Press, vol. 98(2), pages 185-199.
  28. repec:hal:journl:halshs-00364563 is not listed on IDEAS
  29. James Brock & Norman Obst, 2009. "Market Concentration, Economic Welfare, and Antitrust Policy," Journal of Industry, Competition and Trade, Springer, vol. 9(1), pages 65-75, March.
  30. Erkki Koskela & Rune Stenbacka, 2005. "Product Market Competition, Profit Sharing and Equilibrium Unemployment," CESifo Working Paper Series 1603, CESifo Group Munich.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:sdk:wpaper:90. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ulla H. Oehlenschläger)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.