Merger profitability in unionized oligopoly

Abstract

We examine how a merger affects wages of unionized labour and, in turn, the profitability of a merger under both Cournot and Bertrand competition. If unions are plant-specific, we find that a merger is more profitable than in a corresponding model with exogenous wages. 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 unions, on the other hand, results are reversed.