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Merger results under price competition and plant-specific unions

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  • Luciano Fanti
  • Nicola Meccheri

Abstract

This paper analyses the effects of a downstream merger in a differentiated duopoly under price competition and plant-specific unions. We show, in contrast with the preceding literature, that the standard welfare results may be reversed: a downstream merger may increase consumer surplus and overall welfare. In particular, this applies when unions are sufficiently wage-oriented and the market size is included in a certain intermediate range.

Suggested Citation

  • Luciano Fanti & Nicola Meccheri, 2012. "Merger results under price competition and plant-specific unions," Discussion Papers 2012/135, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    • Handle: RePEc:pie:dsedps:2012/135
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2012-135.pdf
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    References listed on IDEAS

    as
    1. Lommerud, Kjell Erik & Straume, Odd Rune & Sorgard, Lars, 2005. "Downstream merger with upstream market power," European Economic Review, Elsevier, vol. 49(3), pages 717-743, April.
    2. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
    3. Petrakis, Emmanuel & Vlassis, Minas, 2000. "Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment?," Labour Economics, Elsevier, vol. 7(3), pages 261-281, May.
    4. Kurt R. Brekke, 2004. "Competition or Coordination in Hospital Markets with Unionised Labour," International Journal of Health Economics and Management, Springer, vol. 4(1), pages 65-89, March.
    5. Symeonidis, George, 2010. "Downstream merger and welfare in a bilateral oligopoly," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 230-243, May.
    6. John H. Pencavel, 1984. "The Tradeoff Between Wages and Employment in Trade Union Objectives," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(2), pages 215-231.
    7. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    mergers; social welfare; price competition; plant-specific unions.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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