Welfare effects of cross-ownership in a unionised duopoly
The present study analyses the effects of an increase in the share of crossownership in a Cournot duopoly with firm-specific monopolistic unions. Since the cross-participation at ownership level implies a lower degree of competition, then in a duopoly without unions, as expected, consumer surplus and social welfare, despite the increase in the industry profits, reduces when cross-participation increases. By contrast, when the labour market is unionised, we show the counterintuitive result, that despite the degree of competition is reduced by cross-ownership, both consumer surplus and social welfare increase with the share of cross-participation. This always occurs provided that unions are sufficiently wage-oriented. Therefore, the policy implication is that, when wage-interested unions are in existence in oligopoly industries, a rise in cross-participation – i.e., a lower degree of competition – is socially preferred. Moreover, all agents (firm’s owner, workers and consumers) agree for the highest possible level of cross-participation.
|Date of creation:||09 Jan 2011|
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