Horizontal mergers, involuntary unemployment, and welfare

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 2009,07

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Monopolization; Horizontal Anticompetitive Practices ; Labor Economics: General ; Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
• Subject: horizontal mergers ; involuntary unemployment ; efficiency defense ; oligopoly ; competition

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Budzinski, Oliver ; Kretschmer, Jürgen-Peter
• Event: Veröffentlichung
• (who): Philipps-University Marburg, Faculty of Business Administration and Economics
• (where): Marburg
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/30114
• Last update: 10.03.2025, 11:43 AM CET