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HORIZONTAL MERGERS WITH CAPITAL ADJUSTMENT: WORKERS' COOPERATIVES AND THE MERGER PARADOX
Author(s) -
DELBONO Flavio,
LAMBERTINI Luca
Publication year - 2016
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/apce.12125
Subject(s) - oligopoly , monopoly , incentive , profit (economics) , microeconomics , variable (mathematics) , economics , industrial organization , capital (architecture) , business , market economy , labour economics , cournot competition , mathematical analysis , mathematics , archaeology , history
We study the incentives towards horizontal merger among firms when the amount of capital is the strategic variable. We focus on workers' cooperatives, but our conclusions apply also to employment‐constrained profit maximizers. Within a simple oligopoly model, we prove that the horizontal merger, for any merger size, is: (i) privately efficient for insiders as well as for outsiders; (ii) socially efficient if market size is large enough, even in the case of merger to monopoly.