How to counter union power? Equilibrium mergers in international oligopoly
Beatrice Pagel and
Christian Wey ()
Journal of Economic Behavior & Organization, 2016, vol. 127, issue C, 16-29
We re-examine the common wisdom that cross-border mergers are the most effective merger strategy for firms facing powerful unions. In contrast, we obtain a domestic merger outcome whenever firms are sufficiently heterogeneous (in terms of productive efficiency and product differentiation). A domestic merger unfolds a “wage-unifying” effect which limits the union's ability to extract rents. When products become sufficiently homogeneous, then cross-border mergers are the unique equilibrium. However, they may be either between firms with the same cost efficiency or with different cost efficiencies. Social welfare is never higher under a domestic merger outcome than under a cross-border merger outcome.
Keywords: Unionization; International oligopoly; Endogenous mergers; Countervailing power (search for similar items in EconPapers)
JEL-codes: D43 J51 L13 (search for similar items in EconPapers)
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Working Paper: How to counter union power? Equilibrium mergers in international oligopoly (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:127:y:2016:i:c:p:16-29
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