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Welfare effects of cross-ownership in a unionised duopoly

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  • Luciano Fanti

Abstract

The 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 Info

Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2011/125.

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Date of creation: 09 Jan 2011
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Handle: RePEc:pie:dsedps:2011/125

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Keywords: Cross-ownership; Duopoly; Unions ; Social Welfare.;

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References

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  1. Alley, Wilson A, 1997. "Partial Ownership Arrangements and Collusion in the Automobile Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 45(2), pages 191-205, June.
  2. Luciano Fanti & Nicola Meccheri, 2010. "The Cournot-Bertrand profit differential in a differentiated duopoly with unions and labour decreasing returns," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2010/107, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
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Cited by:
  1. Luciano Fanti, 2011. "Cross-ownership and unions in a Cournot duopoly: when profits reduce with horizontal product differentiation," Discussion Papers, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy 2011/128, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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