Welfare effects of cross-ownership in a unionised duopoly

Luciano Fanti

ECONOMIA E POLITICA INDUSTRIALE, 2014, vol. 2014/2, issue 2, 21-41

Abstract: The present study analyses the effects of an increase in the share of one-sided cross-ownership in a Cournot duopoly with firm-specific monopolistic unions. Since the cross-participation at ownership level implies a lower degree of competition, then in a duopoly without unions, as expected, consumer surplus and social welfare, despite the increase in the industry profits, are reduced when cross-participation increases. By contrast, when the labour market is unionised, I show the counterintuitive result that, despite the degree of competition is reduced by cross-ownership, both consumer surplus and social welfare increase with the share of cross-participation. This always occurs provided that unions are sufficiently wage-oriented. Moreover, it is shown that the results are also robust to the Bertrand mode of competition. Therefore, the policy implication is that, when wage-interested unions are in existence in oligopoly industries, a rise in cross-participation - i.e. a lower degree of competition - is socially preferred.

Keywords: Propriet? incrociata; duopolio; sindacato; benessere sociale (search for similar items in EconPapers)
JEL-codes: D43 J51 L13 L4 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Welfare effects of cross-ownership in a unionised duopoly (2011)
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