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Theory of Semi-Collusion in the Labor Market

Author

Listed:
  • Pedro Gonzaga

    () (CEF.UP and Faculty of Economics of the University of Porto (FEP))

  • António Brandão

    () (CEF.UP and Faculty of Economics of the University of Porto (FEP))

  • Helder Vasconcelos

    () (CEF.UP and Faculty of Economics of the University of Porto (FEP))

Abstract

We study the effects of cooperative wage setting in industries that use two different types of labor. In particular, we consider a two-stage game where firms hire non-specialized workers in a perfectly competitive labor market and specialized workers that are more productive and expensive, but whose wages can be cooperatively determined by firms. It is shown that semi-collusion leads to lower wages and employment of specialized labor, lower production levels and higher prices, due to the elimination of the business stealing effect, labor force stealing effect and as a result of a dynamic effect that is specific to semi-collusive games.

Suggested Citation

  • Pedro Gonzaga & António Brandão & Helder Vasconcelos, 2014. "Theory of Semi-Collusion in the Labor Market," FEP Working Papers 522, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:522
    as

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    File URL: http://www.fep.up.pt/investigacao/workingpapers/wp522.pdf
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    References listed on IDEAS

    as
    1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-1137, December.
    2. Natalya Shelkova, 2015. "Low-Wage Labor Markets and the Power of Suggestion," Review of Social Economy, Taylor & Francis Journals, vol. 73(1), pages 61-88, March.
    3. Eckard, E Woodrow, Jr, 1991. "Competition and the Cigarette TV Advertising Ban," Economic Inquiry, Western Economic Association International, vol. 29(1), pages 119-133, January.
    4. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
    5. Brod, Andrew & Shivakumar, Ram, 1999. "Advantageous Semi-collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 47(2), pages 221-230, June.
    6. Steen, Frode & Sørgard, Lars, 2010. "Semicollusion," Foundations and Trends(R) in Microeconomics, now publishers, vol. 5(3), pages 153-228, April.
    7. Arijit Mukherjee & Luís Vasconcelos, 2012. "Star Wars: Exclusive Talent and Collusive Outcomes in Labor Markets," Journal of Law, Economics, and Organization, Oxford University Press, vol. 28(4), pages 754-782, October.
    8. Reinhard Selten, 1973. "A Simple Model of Imperfect Competition, where 4 are Few and 6 are Many," Center for Mathematical Economics Working Papers 008, Center for Mathematical Economics, Bielefeld University.
    9. Witness Simbanegavi, 2005. "Informative Advertising: Competition or Cooperation?," Working Papers 33, Economic Research Southern Africa.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Semi-collusion; labor market; oligopsony; business stealing effect; labor force stealing effect; price war effect; shooting the moon strategy.;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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