Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Bergen, Department of Economics

No 12/03: National versus international mergers in unionised oligopoly

Kjell Erik Lommerud (), Odd Rune Straume () and Lars Sørgard ()
Additional contact information
Kjell Erik Lommerud: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway
Odd Rune Straume: Institute for Research in Economics and Business Administration (SNF)
Lars Sørgard: Norwegian School of Economics and Business Administration, Postal: Helleveien 30, N-5045 Bergen, Norway

Abstract: We analyse how the presence of trade unions affects the pattern of mergers in an international oligopoly and the welfare implications thereof. We find that an international merger results in lower wages for all firms. A national merger results in higher wages, highest for the non-merging firms. Using a model of endogenous merger formation, we find that the equilibrium market structure, if it exists, always implies one or more international mergers. Unless products are close substitutes there are more mergers than socially preferred.

Keywords: Endogenous merger; Merger policy; Welfare; Trade unions

JEL-codes: J51; L13; L41

31 pages, June 8, 2003

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