Non-rigid wages and merger profitability reversal under convex costs and centralised unionisation

Luciano Fanti and Nicola Meccheri (nicola.meccheri@unipi.it)

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: Can a merger from duopoly to monopoly be detrimental for profits? This paper deals with this issue by focusing on the interaction between decreasing returns to labour (which imply firms' convex costs) and centralised unionisation. Firstly, it is highlighted that a wage "non-rigidity" result applies: the post-merger wage is higher than in the pre-merger equilibrium. Secondly, it is shown that a "reversal result" in relation to merger profitability actually realises when the union is sufficiently oriented towards wages. Moreover, the higher the reservation wage, the degree of product differentiation and the union's relative bargaining power, the higher the probability that merger reduces profits.

Keywords: wage rigidity result; merger profitability; unionised duopoly; convex costs. (search for similar items in EconPapers)
JEL-codes: D43 J50 L13 (search for similar items in EconPapers)
Date: 2013-07-16
New Economics Papers: this item is included in nep-com and nep-lab
Note: ISSN 2039-1854
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.ec.unipi.it/documents/Ricerca/papers/2013-167.pdf (application/pdf)

Related works:
Journal Article: NON-RIGID WAGES AND MERGER PROFITABILITY REVERSAL UNDER CONVEX COSTS AND CENTRALIZED UNIONIZATION (2016)
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:pie:dsedps:2013/167

Access Statistics for this paper

More papers in Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy Contact information at EDIRC.
Bibliographic data for series maintained by (repec@ec.unipi.it).