Thursday, April 23, 2015

Union-Oligopoly Bargaining and Vertical Differentiation: Do Unions Affect Quality?

Minas Vlassis (Department of Economics, University of Crete, Greece) and Maria Varvataki (University of Crete) ask Union-Oligopoly Bargaining and Vertical Differentiation: Do Unions Affect Quality?

ABSTRACT: This paper investigates unionized oligopolistic markets with differentiated products and quality improvement-R&D investments. In endogenous union structures, we investigate the conditions under which firm-level unions may strategically collude, or not, and the impact of their decisions upon the firms incentives to individually spend on R&D investments. We show that, separate firm-level unions are sustained in the equilibrium, where product quality and the level of R&D investments are relatively high. Moreover, we consider two instances of policy maker's intervention. In the first case, we assume that a benevolent policy maker proceeds to quality improvement-R&D, as a common public good, by undertaking the costs of those investments and providing for free the know-how to the industry. In the second case he finances a percentage of the cost of firm-specific R&D investments. In both cases he finances those costs by indirect taxation on market products. We conclude that all market participant surpluses are higher (and consequently so is Social Welfare), when the R&D - quality improvement is a public good, even if this leads to indirect taxation on market products.

https://lawprofessors.typepad.com/antitrustprof_blog/2015/04/union-oligopoly-bargaining-and-vertical-differentiation-do-unions-affect-quality.html

| Permalink

TrackBack URL for this entry:

https://www.typepad.com/services/trackback/6a00d8341bfae553ef01bb081643f4970d

Listed below are links to weblogs that reference Union-Oligopoly Bargaining and Vertical Differentiation: Do Unions Affect Quality?:

Comments

Post a comment