How to counter union power? Equilibrium mergers in international oligopoly

Irina Baye, Beatrice Pagel and Christian Wey

Journal of Economic Behavior & Organization, 2016, vol. 127, issue C, 16-29

Abstract: 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)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268116300488
Full text for ScienceDirect subscribers only

Related works:
Working Paper: How to counter union power? Equilibrium mergers in international oligopoly (2013)
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:eee:jeborg:v:127:y:2016:i:c:p:16-29

DOI: 10.1016/j.jebo.2016.04.008

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().