Welfare-enhancing trade unions in an oligopoly with excessive entry

Marco de Pinto and Laszlo Goerke

No 7668, CESifo Working Paper Series from CESifo

Abstract: Trade unions are often argued to cause allocative inefficiencies and to lower welfare. We analyze whether this evaluation is also justified in a Cournot-oligopoly with free but costly entry. If input markets are competitive and output per firm declines with the number of firms (business stealing), there is excessive entry into such oligopoly. If trade unions raise wages above the competitive level, output and profits per firm decline, which could deter entry and thus improve welfare. We find that an increase in the union's bargaining power raises welfare if the (inverse) demand curve is (sufficiently) concave. We also show that collective bargaining loosens the linkage between business stealing and excessive entry.

Keywords: endogenous entry; oligopoly; trade union; welfare (search for similar items in EconPapers)
JEL-codes: D43 J51 L13 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-lab
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Related works:
Journal Article: Welfare‐enhancing Trade Unions in an Oligopoly with Excessive Entry (2020)
Working Paper: Welfare-Enhancing Trade Unions in an Oligopoly with Excessive Entry (2016)
Working Paper: Welfare-enhancing Trade Unions in an Oligopoly with Excessive Entry (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7668

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