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When unionisation is profitable for firms in network industries

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  • Fanti, Luciano
  • Buccella, Domenico

Abstract

In an industry characterised by the presence of network effects, this paper investigates a duopolistic game in which firms may choose whether to bargain over wages and employment with unions or to face a competitive labour market (i.e. without unions). If unions are sufficiently risk-averse, it is shown that the presence of strong network effects makes unionisation the Pareto-efficient sub-game perfect Nash equilibrium outcome for firms. The issue of entry is also investigated.

Suggested Citation

  • Fanti, Luciano & Buccella, Domenico, 2017. "When unionisation is profitable for firms in network industries," Economics Discussion Papers 2017-9, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:20179
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    More about this item

    Keywords

    unionised oligopoly; competitive labour market; efficient bargaining; market entry and entry deterrence;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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