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The Impact of Trade Unions on Incentives to Deter Entry

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  • Mathias Dewatripont

Abstract

In this article I illustrate the impact of trade unions on strategic product market behavior. I discuss entry deterrence through capital durability in a model developed by Eaton and Lipsey. In the presence of unions, sunk capital scares away potential entrants but can also raise workers' bargaining power. Firms have thus to trade off these two effects in making their capital decisions. I analyze the impact of potential entry and unions on capital durability and welfare, and I discuss briefly the influence of unions on strategic product-market behavior in general.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 19 (1988)
Issue (Month): 2 (Summer)
Pages: 191-199

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Handle: RePEc:rje:randje:v:19:y:1988:i:summer:p:191-199

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Cited by:
  1. Rupayan Pal & Bibhas Saha, 2010. "Entry Threats, and Inefficiency in ‘Efficient Bargaining’," Labor Economics Working Papers 23020, East Asian Bureau of Economic Research.
  2. Sumon Kumar Bhaumik & Shubhashis Gangopadhyay & Shagun Krishnan, 2006. "Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector," William Davidson Institute Working Papers Series 822, William Davidson Institute at the University of Michigan.
  3. Rupayan Pal & Bibhas Saha, 2010. "Entry Threats and Inefficiency in ‘Efficient Bargaining’," Working Papers id:2833, eSocialSciences.
  4. Edgar Preugschat, 2009. "Unionization Patterns and Firm Reallocation," 2009 Meeting Papers 1114, Society for Economic Dynamics.
  5. Shingo Ishiguro & Laixun Zhao, 2004. "Raising Wages to Deter Entry under Unionization," Discussion Paper Series 155, Research Institute for Economics & Business Administration, Kobe University.

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