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Price competition and the effects of labour union on process innovation


  • Debasmita Basask


We provide a new perspective to the literature on innovation in a unionised labour market by considering price competition in the product market. In contrast to the conventional wisdom, suggesting the presence of labour union reduces the incentive for innovation, we show that this view may not hold true if the ?firms compete in prices. We show that the incentive for innovation may be higher in the presence of labour unions if the goods are close substitutes. We also show that whether the incentive for innovation is higher under decentralised labour unions or under a centralised labour union may depend on product substitutability.

Suggested Citation

  • Debasmita Basask, "undated". "Price competition and the effects of labour union on process innovation," Discussion Papers 12/05, University of Nottingham, School of Economics.
  • Handle: RePEc:not:notecp:12/05

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    References listed on IDEAS

    1. Justus Haucap & Christian Wey, 2004. "Unionisation structures and innovation incentives," Economic Journal, Royal Economic Society, vol. 114(494), pages 149-165, March.
    2. Calabuig, Vicente & Gonzalez-Maestre, Miguel, 2002. "Union structure and incentives for innovation," European Journal of Political Economy, Elsevier, vol. 18(1), pages 177-192, March.
    3. Mukherjee, Arijit & Pennings, Enrico, 2011. "Unionization structure, licensing and innovation," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 232-241, March.
    4. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
    5. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
    6. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
    7. Munch, Jakob Roland & Skaksen, Jan Rose, 2002. " Product Market Integration and Wages in Unionized Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(2), pages 289-299, June.
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    More about this item


    Industry-wide union; Firm-specifi?c union; Process Innovation; Union Utility JEL classification: D43; J51; L13; O31;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • 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
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives


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