DP2738 Merger Profitability in Unionized Oligopoly

Author(s): Kjell Erik Lommerud , Lars Sørgard , Odd Rune Straume

Publication Date: March 2001

Keyword(s): Merger Profitability , Trade Unions , Endogenous Wages

JEL(s): J51 , L13 , L41

Programme Areas: Industrial Organization

Link to this Page: www.cepr.org/pubs/dps/DP2738.asp

We examine how a merger affects wages of unionized labour and, in turn, the profitability of a merger under Cournot competition in differentiated products. 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 to take part in a merger than to be an outsider. For firm-specific unions, on the other hand, results are reversed.