HORIZONTAL MERGERS WITH CAPITAL ADJUSTMENT: WORKERS COOPERATIVES AND THE MERGER PARADOX

Flavio Delbono and Luca Lambertini ()

Annals of Public and Cooperative Economics, 2016, vol. 87, issue 4, 529-539

Abstract: We study the incentives towards horizontal merger among firms when the amount of capital is the strategic variable. We focus on workers' cooperatives, but our conclusions apply also to employment-constrained profit maximizers. Within a simple oligopoly model, we prove that the horizontal merger, for any merger size, is: (i) privately efficient for insiders as well as for outsiders; (ii) socially efficient if market size is large enough, even in the case of merger to monopoly.

Date: 2016
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Working Paper: Horizontal Mergers with Capital Adjustment: Workers' Cooperatives and the Merger Paradox (2014)
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