IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Capacity choice and welfare under alternative unionisation structures

  • Luciano Fanti
  • Nicola Meccheri

This paper studies how unionisation structures that differ in the de-gree of wage setting centralisation interplay with the strategic choice of production capacity by firms and how this affects product market outcomes. When labour markets are unionised and firms compete in quantities, they typically opt for under-capacity in order to dampen the unions’ wage claims. This is in contrast with the convent ional choice of over-capacity that applies when labour markets ar e competitive. Moreover, the level of capacity is generally more effic ient under centralised unionisation than in a decentralised structur e. Relative to more general welfare outcomes, profits are always higher und er decentralised unionisation, but both consumer surplus and overa ll welfare can be higher under a centralised structure, depending on th e unions’preference towards wages or employment. Introducing produ ct differentiation and price competition enlarges the range of situa tions, in which centralised unionisation is welfare-enhancing

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.ec.unipi.it/documents/Ricerca/papers/2014-176.pdf
Download Restriction: no

Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2014/176.

as
in new window

Length:
Date of creation: 01 Feb 2014
Date of revision:
Handle: RePEc:pie:dsedps:2014/176
Contact details of provider: Postal: Via Cosimo Ridolfi, 10 - 56124 PISA
Phone: +39 050 22 16 466
Fax: +39 050 22 16 384
Web page: http://www.ec.unipi.itEmail:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Constantine Manasakis & Emmanuel Petrakis, 2009. "Union structure and firms' incentives for cooperative R&D investments," Canadian Journal of Economics, Canadian Economics Association, vol. 42(2), pages 665-693, May.
  2. Naylor, Robin, 1997. "Union Wage Strategies and International Trade," The Warwick Economics Research Paper Series (TWERPS) 480, University of Warwick, Department of Economics.
  3. repec:ebl:ecbull:eb-06l10011 is not listed on IDEAS
  4. Justus Haucap & Uwe Pauly & Christian Wey, 2006. "A Cartel Analysis of the German Labor Institutions and Its Implications for Labor Market Reforms," Discussion Papers of DIW Berlin 651, DIW Berlin, German Institute for Economic Research.
  5. Horn, H. & Wolinsky, A., 1988. "Bilateral Monopolies And Incentives For Merger," Papers 410, Stockholm - International Economic Studies.
  6. Haucap, Justus & Wey, Christian, 2003. "Unionisation Structures and Innovation Incentives," Working Paper 21/2003, Helmut Schmidt University, Hamburg.
  7. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
  8. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, August.
  9. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
  10. Vives, Xavier, 1986. "Commitment, flexibility and market outcomes," International Journal of Industrial Organization, Elsevier, vol. 4(2), pages 217-229, June.
  11. Basu, Kaushik & Singh, Nirvikar, 1990. "Entry-Deterrence in Stackelberg Perfect Equilibria," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 61-71, February.
  12. Lommerud, Kjell Erik & Straume, Odd Rune & Sorgard, Lars, 2005. "Downstream merger with upstream market power," European Economic Review, Elsevier, vol. 49(3), pages 717-743, April.
  13. repec:ebl:ecbull:v:12:y:2006:i:8:p:1-6 is not listed on IDEAS
  14. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
  15. John H. Pencavel, 1982. "The Trade-Off between Wages and Employment in Trade Union Objectives," NBER Working Papers 0870, National Bureau of Economic Research, Inc.
  16. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
  17. Yuanzhu Lu & Sougata Poddar, 2004. "Mixed oligopoly and the choice of capacity," CEMA Working Papers 495, China Economics and Management Academy, Central University of Finance and Economics.
  18. Mónica Correa-López, 2007. "Price and Quantity Competition in a Differentiated Duopoly with Upstream Suppliers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 469-505, 06.
  19. Rupayan Pal & Bibhas Saha, 2008. "Union-oligopoly bargaining and entry deterrence: a reassessment of limit pricing," Journal of Economics, Springer, vol. 95(2), pages 121-147, November.
  20. Shoji Haruna, 1996. "A Note on Holding Excess Capacity to Deter Entry in a Labour-Managed Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 29(2), pages 493-99, May.
  21. Nicola Meccheri & Luciano Fanti, 2012. "Managerial delegation under alternative unionization structures," Discussion Papers 2012/138, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  22. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
  23. Bughin, Jacques & Vannini, Stefano, 1995. "Strategic direct investment under unionized oligopoly," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 127-145, March.
  24. repec:ebl:ecbull:v:12:y:2004:i:2:p:1-7 is not listed on IDEAS
  25. Symeonidis, George, 2010. "Downstream merger and welfare in a bilateral oligopoly," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 230-243, May.
  26. Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 197-225.
  27. Arijit Mukherjee & Kullapat Suetrong, 2012. "Unionisation Structure and Outward Foreign Direct Investment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(2), pages 266-279, June.
  28. Bulow, Jeremy & Geanakoplos, John & Klemperer, Paul, 1985. "Holding Idle Capacity to Deter Entry [The Role of Investment in Entry Deterrence]," Economic Journal, Royal Economic Society, vol. 95(377), pages 178-82, March.
  29. Kurt R. Brekke, 2004. "Competition or Coordination in Hospital Markets with Unionised Labour," International Journal of Health Care Finance and Economics, Springer, vol. 4(1), pages 65-89, 03.
  30. Nicola Meccheri & Luciano Fanti, 2014. "Managerial Delegation Contracts under Centralized Unionization," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 35(1), pages 51-66, 01.
  31. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
  32. repec:ebl:ecbull:eb-04l30001 is not listed on IDEAS
  33. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August.
  34. repec:ebl:ecbull:v:12:y:2007:i:26:p:1-7 is not listed on IDEAS
  35. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
  36. Lopez, Monica Correa & Naylor, Robin A., 2004. "The Cournot-Bertrand profit differential: A reversal result in a differentiated duopoly with wage bargaining," European Economic Review, Elsevier, vol. 48(3), pages 681-696, June.
  37. Zhao, Laixun, 2001. "Unionization, vertical markets, and the outsourcing of multinationals," Journal of International Economics, Elsevier, vol. 55(1), pages 187-202, October.
  38. Mukherjee, Arijit & Pennings, Enrico, 2011. "Unionization structure, licensing and innovation," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 232-241, March.
  39. repec:ebl:ecbull:eb-09-00277 is not listed on IDEAS
  40. Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-44, April.
  41. Stewart, Geoff, 1991. "Strategic Entry Interactions Involving Profit-Maximising and Labour-Managed Firms," Oxford Economic Papers, Oxford University Press, vol. 43(4), pages 570-83, October.
  42. Wen, Mei & Sasaki, Dan, 2001. "Would Excess Capacity in Public Firms Be Socially Optimal?," The Economic Record, The Economic Society of Australia, vol. 77(238), pages 283-90, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:pie:dsedps:2014/176. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.