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Theory of Semi-Collusion in the Labor Market

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  • Pedro Gonzaga

    ()
    (CEF.UP and Faculty of Economics of the University of Porto (FEP))

  • António Brandão

    ()
    (CEF.UP and Faculty of Economics of the University of Porto (FEP))

  • Helder Vasconcelos

    ()
    (CEF.UP and Faculty of Economics of the University of Porto (FEP))

Abstract

We study the effects of cooperative wage setting in industries that use two different types of labor. In particular, we consider a two-stage game where firms hire non-specialized workers in a perfectly competitive labor market and specialized workers that are more productive and expensive, but whose wages can be cooperatively determined by firms. It is shown that semi-collusion leads to lower wages and employment of specialized labor, lower production levels and higher prices, due to the elimination of the business stealing effect, labor force stealing effect and as a result of a dynamic effect that is specific to semi-collusive games.

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Bibliographic Info

Paper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 522.

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Length: 45 pages
Date of creation: Jan 2014
Date of revision:
Handle: RePEc:por:fepwps:522

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Keywords: Semi-collusion; labor market; oligopsony; business stealing effect; labor force stealing effect; price war effect; shooting the moon strategy.;

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References

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  1. Arijit Mukherjee & Luís Vasconcelos, 2012. "Star Wars: Exclusive Talent and Collusive Outcomes in Labor Markets," Journal of Law, Economics and Organization, Oxford University Press, vol. 28(4), pages 754-782, October.
  2. Reinhard Selten, 1973. "A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many," Working Papers 008, Bielefeld University, Center for Mathematical Economics.
  3. Natalya Y. Shelkova, 2008. "Low-wage labor markets amd the power of suggestion," Working Papers 1112, Princeton University, Department of Economics, Industrial Relations Section..
  4. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  5. d'ASPREMONT, Claude & JACQUEMIN, Alexis, . "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP -823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Eckard, E Woodrow, Jr, 1991. "Competition and the Cigarette TV Advertising Ban," Economic Inquiry, Western Economic Association International, vol. 29(1), pages 119-33, January.
  7. Brod, Andrew & Shivakumar, Ram, 1999. "Advantageous Semi-collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 221-30, June.
  8. Steen, Frode & S�rgard, Lars, 2010. "Semicollusion," Foundations and Trends(R) in Microeconomics, now publishers, vol. 5(3), pages 153-228, April.
  9. Witness Simbanegavi, 2005. "Informative Advertising: Competition or Cooperation?," Working Papers 33, Economic Research Southern Africa.
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