Horizontal Mergers, Involuntary Unemployment, and Welfare

Oliver Budzinski and Jürgen-Peter Kretschmer ()
Additional contact information
Jürgen-Peter Kretschmer: Philipps-University of Marburg

No 200907, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: 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 effect increases welfare by reducing the costs of production (synergies). However, 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.

Keywords: horizontal mergers; involuntary unemployment; efficiency defense; oligopoly; competition (search for similar items in EconPapers)
JEL-codes: J01 L13 L16 L41 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2009
New Economics Papers: this item is included in nep-com, nep-ind, nep-lab and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Forthcoming in

Downloads: (external link)
https://www.uni-marburg.de/en/fb02/research-groups ... 7-2009_budzinski.pdf First version, 2009 (application/pdf)

Related works:
Working Paper: Horizontal Mergers, Involuntary Unemployment, and Welfare (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200907

Access Statistics for this paper

More papers in MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) Contact information at EDIRC.
Bibliographic data for series maintained by Bernd Hayo ().