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Union Power and Product Market Competition : Evidence from the Airline Industry

Author

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  • Damien J. NEVEN
  • Lars-Hendrik RÖLLER
  • Zhentang ZHANG

Abstract

In this paper we specify and estimate a structural model which links product market competition and union power. The model has a two-stage setting in which wages are determined through bargaining between management and unions in the first stage, with a price-setting market game to follow in the second stage. Using data for eight European airlines from 1976-1994, we provide evidence on price-cost margins and the measurement of market power in a model of rent sharing. In particular, we find that the welfare effects of rent sharing work mainly through reducing firms' profits, rather than consumers surplus. As a consequence the static impact of unions is more on equity rather than efficiency.

Suggested Citation

  • Damien J. NEVEN & Lars-Hendrik RÖLLER & Zhentang ZHANG, 1998. "Union Power and Product Market Competition : Evidence from the Airline Industry," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9810, Université de Lausanne, Faculté des HEC, DEEP.
  • Handle: RePEc:lau:crdeep:9810
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    References listed on IDEAS

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    1. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 443-456, June.
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    Cited by:

    1. Kauppi, Heikki & Koskela, Erkki & Stenbacka, Rune, 2004. "Equilibrium Unemployment and Investment Under Product and Labour Market Imperfections," IZA Discussion Papers 1058, Institute for the Study of Labor (IZA).
    2. Heikki Kauppi & Erkki Koskela & Rune Stenbacka, 2004. "Equilibrium Unemployment and Capital Intensity Under Product and Labor Market Imperfections," CESifo Working Paper Series 1343, CESifo Group Munich.
    3. Kauppi, Heikki & Koskela, Erkki & Stenbacka, Rune, 2004. "Equilibrium unemployment and investment under product and labour market imperfections," Research Discussion Papers 11/2004, Bank of Finland.

    More about this item

    Keywords

    efficiency; union power; market power; rent sharing; airline industry;

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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