Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82801
Authors: 
Budzinski, Oliver
Budzinski, Jürgen-Peter
Year of Publication: 
2009
Series/Report no.: 
Working Paper, Department of Environmental and Business Economics, University of Southern Denmark 90
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
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