Downstream merger with oligopolistic input suppliers

Arbeitspapier

We examine how a downstream merger affects input prices and, in turn, the profitability of such a merger under Cournot competition with differentiated products. Input suppliers can be interpreted as ordinary upstream firms, or trade unions organising workers. If the input suppliers are plant-specific, we find that a merger is more profitable than in a corresponding model with exogenous input prices. In contrast to the received literature, we find that it can be more profitable to take part in a merger than being an outsider. For firm-specific input suppliers, on the other hand, results are reversed. We apply our model to endogenous merger formation in an international oligopoly, and show that the equilibrium market structure is likely to be characterised by cross-border merger.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WZB Discussion Paper ; No. FS IV 01-22

Classification and Topics

• Classification: Wirtschaft ; Trade Unions: Objectives, Structure, and Effects ; Oligopoly and Other Imperfect Markets ; Monopolization; Horizontal Anticompetitive Practices
• Subject: merger profitability ; input suppliers ; trade unions ; cross-border merger

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lommerud, Kjell Erik ; Straume, Odd Rune ; Sørgard, Lars
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (where): Berlin
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/52601
• Last update: 10.03.2025, 11:41 AM CET