How to counter union power? Equilibrium mergers in international oligopoly

Beatrice Pagel and Christian Wey

No 89, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: We re-examine the common wisdom that cross-border mergers are the most effective merger strategy for firms facing powerful unions. In contrast, we obtain a domestic merger outcome whenever firms are sufficiently heterogeneous (in terms of productive efficiency and product differentiation). A domestic merger unfolds a wage-unifying effect which limits the union's ability to extract rents. When asymmetries among fims vanish, then cross-border mergers are the unique equilibrium. However, they may be either between symmetric or asymmetric firms. Social welfare is never higher under a domestic merger outcome than under a cross-border merger outcome.

Keywords: Unionization; International Oligopoly; Endogenous Mergers; Countervailing Power (search for similar items in EconPapers)
JEL-codes: D43 J51 L13 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-com and nep-cwa
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Journal Article: How to counter union power? Equilibrium mergers in international oligopoly (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:89

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