IDEAS home Printed from https://ideas.repec.org/p/zbw/vfsc16/145498.html
   My bibliography  Save this paper

Welfare-enhancing Trade Unions in an Oligopoly with Excessive Entry

Author

Listed:
  • De Pinto, Marco
  • Goerke, Laszlo

Abstract

If input markets are competitive and output per firm declines with the number of firms (business stealing effect), there will be excessive entry into a Cournot oligopoly for a homogeneous commodity. However, input markets are often imperfectly competitive and the price of labor is determined by collective bargaining. The resulting rise in wages reduces output and profits and can deter entry. We analyze under which conditions greater bargaining power by the trade union reduces entry and raises welfare. Furthermore, we show that collective bargaining loosens the linkage between business stealing and excessive entry.

Suggested Citation

  • De Pinto, Marco & Goerke, Laszlo, 2016. "Welfare-enhancing Trade Unions in an Oligopoly with Excessive Entry," VfS Annual Conference 2016 (Augsburg): Demographic Change 145498, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc16:145498
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/145498/1/VfS_2016_pid_6292.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    2. Svejnar, Jan, 1986. "Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry," Econometrica, Econometric Society, vol. 54(5), pages 1055-1078, September.
    3. Capuano, Stella & Hauptmann, Andreas & Schmerer, Hans-Jörg, 2014. "Trade and unions: Can exporters benefit from collective bargaining?," IAB-Discussion Paper 201424, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    4. Amir, Rabah & De Castro, Luciano & Koutsougeras, Leonidas, 2014. "Free entry versus socially optimal entry," Journal of Economic Theory, Elsevier, vol. 154(C), pages 112-125.
    5. Langenmayr, Dominika & Haufler, Andreas & Bauer, Christian J., 2015. "Should tax policy favor high- or low-productivity firms?," European Economic Review, Elsevier, vol. 73(C), pages 18-34.
    6. Naylor, Robin & Soegaard, Christian, 2014. "The Effects of Entry in Oligopoly with Bargained Wages," Economic Research Papers 270239, University of Warwick - Department of Economics.
    7. Agustin Roitman, 2011. "Precautionary Savings in a Small Open Economy Revisited," IMF Working Papers 2011/253, International Monetary Fund.
    8. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-489, March.
    9. Arghya Ghosh & Hodaka Morita, 2007. "Free entry and social efficiency under vertical oligopoly," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 541-554, June.
    10. Marjit, Sugata & Mukherjee, Arijit, 2013. "Foreign competition and social efficiency of entry," Economic Modelling, Elsevier, vol. 32(C), pages 108-112.
    11. Basak, Debasmita & Mukherjee, Arijit, 2016. "Social efficiency of entry in a vertically related industry," Economics Letters, Elsevier, vol. 139(C), pages 8-10.
    12. Dewatripont, Mathias, 1987. "Entry deterrence under trade unions," European Economic Review, Elsevier, vol. 31(1-2), pages 149-156.
    13. Oswald, Andrew J, 1982. "Trade Unions, Wages and Unemployment: What Can Simple Models Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 526-545, November.
    14. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001. "Collective wage setting when wages are generally binding An antitrust perspective," International Review of Law and Economics, Elsevier, vol. 21(3), pages 287-307, September.
    15. Shingo Ishiguro & Laixun Zhao, 2004. "Raising Wages to Deter Entry under Unionization," Discussion Paper Series 155, Research Institute for Economics & Business Administration, Kobe University.
    16. Varian, Hal R, 1985. "Price Discrimination and Social Welfare," American Economic Review, American Economic Association, vol. 75(4), pages 870-875, September.
    17. Perry, Martin K, 1984. "Scale Economies, Imperfect Competition, and Public Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 313-333, March.
    18. Besley, Timothy, 1989. "Commodity taxation and imperfect competition : A note on the effects of entry," Journal of Public Economics, Elsevier, vol. 40(3), pages 359-367, December.
    19. Shingo Ishiguro & Laixun Zhao, 2009. "Raising Wages To Deter Entry Into Unionized Markets," The Japanese Economic Review, Japanese Economic Association, vol. 60(4), pages 435-445, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oliwia Komada & Pawel Strzelecki & Joanna Tyrowicz, 2019. "A regression discontinuity evaluation of reducing early retirement eligibility in Poland," International Journal of Manpower, Emerald Group Publishing, vol. 40(2), pages 286-303, May.
    2. Laszlo Goerke, 2018. "Sickness Absence and Relative Income," IAAEU Discussion Papers 201812, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    3. Krzysztof Makarski & Joanna Tyrowicz & Magda Malec, 2018. "Evaluating welfare and economic effects of raised fertility," GRAPE Working Papers 25, GRAPE Group for Research in Applied Economics.
    4. Laszlo Goerke, 2019. "Corporate social responsibility and tax avoidance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(2), pages 310-331, April.
    5. de Pinto Marco & Goerke Laszlo, 2019. "Efficiency Wages in Cournot-Oligopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-13, October.
    6. Laszlo Goerke & Marco de Pinto, 2021. "Cost Uncertainty in an Oligopoly with Endogenous Entry," IAAEU Discussion Papers 202105, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    7. Florian Hett & Markus Kroell & Mario Mechtel, 2019. "The Structure and Behavioral Effects of Revealed Social Identity Preferences," IAAEU Discussion Papers 201903, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    8. Stephan Huber & Jochen Model & Silvio Städter, 2019. "Ostracism in alliances of teams and individuals: Voting, exclusion, contribution, and earnings," IAAEU Discussion Papers 201901, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    9. Goerke, Laszlo, 2020. "A political economy perspective on horizontal FDI in a dynamic Cournot-oligopoly with endogenous entry," European Journal of Political Economy, Elsevier, vol. 63(C).
    10. Alberto Palermo & Clemens Buchen & Bruno Deffains, 2018. "Stigmatization, Liability and Public Enforcement of Law," IAAEU Discussion Papers 201811, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    11. Debasmita Basak & Emmanuel Petrakis, 2021. "Social efficiency of entry: Implications of network externalities," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(4), pages 820-829, November.

    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. de Pinto Marco & Goerke Laszlo, 2019. "Efficiency Wages in Cournot-Oligopoly," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-13, October.
    2. Goerke, Laszlo, 2020. "A political economy perspective on horizontal FDI in a dynamic Cournot-oligopoly with endogenous entry," European Journal of Political Economy, Elsevier, vol. 63(C).
    3. Laszlo Goerke, 2017. "Tax evasion in a Cournot oligopoly with endogenous entry," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(5), pages 754-779, September.
    4. Laszlo Goerke & Marco de Pinto, 2021. "Cost Uncertainty in an Oligopoly with Endogenous Entry," IAAEU Discussion Papers 202105, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    5. Debasmita Basak & Emmanuel Petrakis, 2021. "Social efficiency of entry: Implications of network externalities," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(4), pages 820-829, November.
    6. Shingo Ishiguro & Laixun Zhao, 2009. "Raising Wages To Deter Entry Into Unionized Markets," The Japanese Economic Review, Japanese Economic Association, vol. 60(4), pages 435-445, December.
    7. Peyman Khezr & Flavio M. Menezes, 2021. "Entry and social efficiency under Bertrand competition and asymmetric information," International Journal of Game Theory, Springer;Game Theory Society, vol. 50(4), pages 927-944, December.
    8. David, Maia & Nimubona, Alain-Désiré & Sinclair-Desgagné, Bernard, 2011. "Emission taxes and the market for abatement goods and services," Resource and Energy Economics, Elsevier, vol. 33(1), pages 179-191, January.
    9. Cao, Hang & Wang, Leonard F.S., 2020. "Social efficiency of entry in a vertically related industry revisited," Economics Letters, Elsevier, vol. 192(C).
    10. repec:zbw:rwirep:0329 is not listed on IDEAS
    11. Tsai, Yingyi & Mukherjee, Arijit & Chen, Jong-Rong, 2016. "Host market competition, foreign FDI and domestic welfare," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 13-22.
    12. Luca Colombo & Paola Labrecciosa & Patrick Paul Walsh, 2005. "Optimal Corporation Tax: An I.O. Approach," The Institute for International Integration Studies Discussion Paper Series iiisdp97, IIIS.
    13. Keisuke Hattori & Takeshi Yoshikawa, 2016. "Free entry and social inefficiency under co-opetition," Journal of Economics, Springer, vol. 118(2), pages 97-119, June.
    14. Clément Carbonnier, 2006. "Who pays commodity taxes? Evidence from French reforms, 1987-1999," PSE Working Papers halshs-00590515, HAL.
    15. Shoji Haruna & Rajeev Goel, 2011. "R&D, free entry, and social inefficiency," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 20(1), pages 89-101.
    16. Naylor, Robin & Soegaard, Christian, 2018. "The Effects of Entry in Oligopolistic Trade with Bargained Input Prices," Economic Research Papers 269084, University of Warwick - Department of Economics.
    17. Ton S van den Bremer & Frederick van der Ploeg, 2013. "Managing and Harnessing Volatile Oil Windfalls," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(1), pages 130-167, April.
    18. Pfann, Gerard A & van Kranenburg, Hans, 2003. "Tax Policy, Location Choices, and Market Structure," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 61-83, April.
    19. Ronald Bachmann & Thomas K. Bauer & Hanna Frings, 2014. "Minimum Wages as a Barrier to Entry: Evidence from Germany," LABOUR, CEIS, vol. 28(3), pages 338-357, September.
    20. Arijit Mukherjee & Udo Broll & Soma Mukherjee, 2009. "The welfare effects of entry: the role of the input market," Journal of Economics, Springer, vol. 98(3), pages 189-201, December.
    21. Hiroshi Kitamura & Akira Miyaoka & Misato Sato, 2011. "Free Entry, Market Diffusion, and Social Inefficiency with Endogenously Growing Demand," Discussion Papers in Economics and Business 11-04-Rev, Osaka University, Graduate School of Economics, revised Nov 2012.

    More about this item

    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

    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:vfsc16:145498. 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: . General contact details of provider: https://edirc.repec.org/data/vfsocea.html .

    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/vfsocea.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.