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Is Competition or Collusion in the Product Market Relevant for Labour Markets?


  • Fabian Bergès-Sennou
  • Stéphane Caprice


Abstract In non-union models, there is an ambiguous relationship between collusion on the product market and the resulting impact on the labour market. We can derive some conclusions by assuming a dual labour market with qualified and unqualified workers and taking into account the efficiency effect when employing qualified workers. The framework adopted here consists of two firms competing to hire workers on the qualified labour market, and then competing (or colluding) on the product market to sell their production. While qualified workers are heterogeneous in their specialization, firms sell imperfect substitute goods on the product market. First, if the two firms collude in setting prices on the product market, this leads to an increase in the symmetric equilibrium wage in the qualified labour market, as well as a rise in productivity. Unions are not considered. Second, although the number of unqualified workers hired decreases along with the total employment, the wage bill can rise because of intensified competition on the qualified labour market. JEL Classification: J21, J31, L13, Q13.

Suggested Citation

  • Fabian Bergès-Sennou & Stéphane Caprice, 2008. "Is Competition or Collusion in the Product Market Relevant for Labour Markets?," Recherches économiques de Louvain, De Boeck Université, vol. 74(3), pages 273-298.
  • Handle: RePEc:cai:reldbu:rel_743_0273

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    References listed on IDEAS

    1. Janeba, Eckhard, 1998. "Tax competition in imperfectly competitive markets," Journal of International Economics, Elsevier, vol. 44(1), pages 135-153, February.
    2. Benoît Mulkay & Bronwyn H, Hall & Jacques Mairesse, 2000. "Firm Level Investment and R&D in France and the United States : A Comparison," Working Papers 2000-49, Center for Research in Economics and Statistics.
    3. Docquier, Frédéric & Faye, Ousmane & Pestieau, Pierre, 2008. "Is migration a good substitute for education subsidies?," Journal of Development Economics, Elsevier, vol. 86(2), pages 263-276, June.
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    5. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 441-463.
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    Cited by:

    1. Pedro Gonzaga & António Brandão & Hélder Vasconcelos, 2013. "Theory of Collusion in the Labor Market," FEP Working Papers 477, Universidade do Porto, Faculdade de Economia do Porto.
    2. George Symeonidis, 2008. "Downstream Competition, Bargaining, and Welfare," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(1), pages 247-270, 03.

    More about this item


    rent-sharing; employment; oligopoly; collusion;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness


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