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Title:Horizontal mergers, involuntary unemployment, and welfare PDF Logo
Authors:Budzinski, Oliver
Kretschmer, Jürgen-Peter
Issue Date:2009
Series/Report no.:Joint discussion paper series in economics 2009,07
Abstract: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.
Subjects:horizontal mergers
involuntary unemployment
efficiency defense
oligopoly
competition
JEL:L13
L41
J01
L16
Document Type:Working Paper
Appears in Collections:MAGKS Joint Discussion Paper Series in Economics, Universität Marburg

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