Welfare effects of cross-ownership in a unionised duopoly
AbstractThe present study analyses the effects of an increase in the share of crossownership in a Cournot duopoly with firm-specific monopolistic unions. Since the cross-participation at ownership level implies a lower degree of competition, then in a duopoly without unions, as expected, consumer surplus and social welfare, despite the increase in the industry profits, reduces when cross-participation increases. By contrast, when the labour market is unionised, we show the counterintuitive result, that despite the degree of competition is reduced by cross-ownership, both consumer surplus and social welfare increase with the share of cross-participation. This always occurs provided that unions are sufficiently wage-oriented. Therefore, the policy implication is that, when wage-interested unions are in existence in oligopoly industries, a rise in cross-participation – i.e., a lower degree of competition – is socially preferred. Moreover, all agents (firm’s owner, workers and consumers) agree for the highest possible level of cross-participation.
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Bibliographic InfoPaper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2011/125.
Date of creation: 09 Jan 2011
Date of revision:
Cross-ownership; Duopoly; Unions ; Social Welfare.;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L4 - Industrial Organization - - Antitrust Issues and Policies
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
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