IDEAS home Printed from https://ideas.repec.org/p/zbw/glodps/1377.html
   My bibliography  Save this paper

Union structure and product quality differentiation

Author

Listed:
  • Meccheri, Nicola
  • Vergari, Cecilia

Abstract

This paper investigates the issue of how alternative unionization structures in labour markets affect the choice of product quality differentiation by firms in product markets, and how this determines relative welfare outcomes of different union structures. In the presence of decentralized wage bargaining (firm-specific or coordinated unionization), increasing product differentiation not only reduces competition between firms but it also affects wage setting. Instead, when wage setting is centralized, wages do not depend on product quality differentiation in the product market but when the bargained wage is sufficiently high, the high-quality firm monopolizes the market. In turn, union wage setting does affect the endogenous choices by firms of the quality level of their products: especially when unionization is decentralized and unions have high relative bargaining power, the average product quality in the product market increases remarkably. However, as unionization reduces output, consumer surplus and overall welfare are always lower with respect to the case in which labour market is perfectly competitive, and decentralized unionization is generally welfare enhancing with respect to centralized unionization.

Suggested Citation

  • Meccheri, Nicola & Vergari, Cecilia, 2024. "Union structure and product quality differentiation," GLO Discussion Paper Series 1377, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:1377
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/281172/1/GLO-DP-1377.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Meccheri Nicola, 2023. "On the Social Desirability of Centralized Wage Setting when Firms are Run by Biased Managers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 23(3), pages 701-725, July.
    2. Minas Vlassis & Maria Varvataki, 2014. "Union-Oligopoly Bargaining and Vertical Differentiation: Do Unions Affect Quality? Dynamic Analysis," Working Papers 1410, University of Crete, Department of Economics.
    3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    4. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    5. Boris Cournède & Oliver Denk & Paula Garda & Peter Hoeller, 2016. "Enhancing Economic Flexibility: What Is in It for Workers?," OECD Economic Policy Papers 19, OECD Publishing.
    6. Berton, Fabio & Dughera, Stefano & Ricci, Andrea, 2021. "Are Unions Detrimental to Innovation? Theory and Evidence," IZA Discussion Papers 14102, Institute of Labor Economics (IZA).
    7. Choi, Chong Ju & Shin, Hyun Song, 1992. "A Comment on a Model of Vertical Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 229-231, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yong-Hwan Noh & Giancarlo Moschini, 2006. "Vertical Product Differentiation, Entry-Deterrence Strategies, and Entry Qualities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(3), pages 227-252, November.
    2. Peter-J. Jost, 2023. "Price commitment and the strategic launch of a fighter brand," Quantitative Marketing and Economics (QME), Springer, vol. 21(3), pages 381-435, September.
    3. Xavier Martinez-Giralt & Barros Pedro Pita, 2005. "Bargaining and idle public sector capacity in health care," Economics Bulletin, AccessEcon, vol. 9(5), pages 1-8.
    4. Kovác, Eugen & Vinogradov, Viatcheslav & Zigic, Kresimir, 2010. "Technological leadership and persistence of monopoly under endogenous entry: Static versus dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1421-1441, August.
    5. Akio Kawasaki, 2017. "Airport Privatization Competition Including Domestic Airline Markets," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 29(1), pages 2-17, March.
    6. Dawid, Herbert & Kopel, Michael & Kort, Peter M., 2013. "New product introduction and capacity investment by incumbents: Effects of size on strategy," European Journal of Operational Research, Elsevier, vol. 230(1), pages 133-142.
    7. Bourreau, Marc & Jullien, Bruno, 2018. "Mergers, investments and demand expansion," Economics Letters, Elsevier, vol. 167(C), pages 136-141.
    8. Jen-Te Yao, 2005. "Counterfeiting and an Optimal Monitoring Policy," European Journal of Law and Economics, Springer, vol. 19(1), pages 95-114, January.
    9. Fabian Herweg & Daniel Müller, 2014. "Price Discrimination in Input Markets: Quantity Discounts and Private Information," Economic Journal, Royal Economic Society, vol. 124(577), pages 776-804, June.
    10. repec:spo:wpmain:info:hdl:2441/16juu6v6rg8rq8nl0u1grb4jm6 is not listed on IDEAS
    11. Yabin Zhang & Jiang Wu & Hongshan Ai, 2009. "The technology gap and the limit of imitation: An inspection of the strategy of 'exchanging market for technology'," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 7(4), pages 447-455.
    12. repec:ebl:ecbull:v:4:y:2008:i:34:p:1-10 is not listed on IDEAS
    13. Liang Lu, 2015. "Proliferation and Entry Deterrence in Vertically Differentiated Markets," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2015-06, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    14. Krishnendu Ghosh DASTIDAR & YANO Makoto, 2017. "In many emerging economies corruption, poor quality of information and poor governance lead to restricted entry. In this paper we analyze the determinants of the .height.of entry barrier in a developi," Discussion papers 17010, Research Institute of Economy, Trade and Industry (RIETI).
    15. Noto, Claudio, 2020. "Airport slots, secondary trading, and congestion pricing at an airport with a dominant network airline," Research in Transportation Economics, Elsevier, vol. 79(C).
    16. Ming Chung Chang & Hsiao‐Ping Peng, 2009. "Structure Regulation, Price Structure, Cross‐Subsidization And Marginal Cost Of Public Funds," Manchester School, University of Manchester, vol. 77(6), pages 675-698, December.
    17. Guido Candela & Roberto Cellini, 2006. "Investment in Tourism Market: A Dynamic Model of Differentiated Oligopoly," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 35(1), pages 41-58, September.
    18. Georgi Burlakov, 2016. "Why Mixed Qualities May Not Survive at Equilibrium: The Case of Vertical Product Differentiation," CERGE-EI Working Papers wp569, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    19. Pedro Barros & Xavier Martinez-Giralt, 2005. "Negotiation Advantages of Professional Associations in Health Care," International Journal of Health Economics and Management, Springer, vol. 5(2), pages 191-204, June.
    20. Melkonian, Tigran A., 1998. "Two essays on reputation effects in economic models," ISU General Staff Papers 1998010108000012873, Iowa State University, Department of Economics.
    21. Julia Cagé, 2014. "Media Competition, Information Provision and Political Participation," SciencePo Working papers hal-03602440, HAL.
    22. Pennerstorfer, Dieter & Weiss, Christoph R., 2012. "On the Relative Disadvantage of Cooperatives: Vertical Product Differentiation in a Mixed Oligopoly," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 40(1), pages 1-32.

    More about this item

    Keywords

    unionization structures; vertical differentiation; welfare;
    All these keywords.

    JEL classification:

    • 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
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:glodps:1377. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/glabode.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.