(Local) Wage Settings and (International) Entry Deterrence

Domenico Buccella

Prague Economic Papers, 2017, vol. 2017, issue 2, 170-187

Abstract: The present paper investigates the use of national wage settings as a mechanism to deter entry via foreign direct investment (FDI) in a unionized monopoly industry. A union which sets centralized wages in a multi-unit firm can both decentralize and change the agenda to prevent the market entry of a non-unionized firm. The adoption of the efficient bargaining agenda is especially effective to deter entry because it lowers the fixed-cost threshold the entrant can bear. Moreover, through side-payments, the incumbent and the union can have common interests in modifying the wage setting to reach outcomes that is Pareto-superior to duopoly. However, if the union cedes "too much power" and becomes "too weak", internal conflicts with the incumbent firm may arise.

Keywords: labour unions; oligopoly; market entry (search for similar items in EconPapers)
JEL-codes: J51 L13 L22 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://pep.vse.cz/doi/10.18267/j.pep.602.html (text/html)
http://pep.vse.cz/doi/10.18267/j.pep.602.pdf (application/pdf)
free of charge

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:prg:jnlpep:v:2017:y:2017:i:2:id:602:p:170-187

Ordering information: This journal article can be ordered from
Editorial office Prague Economic Papers, University of Economics, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic
http://pep.vse.cz

DOI: 10.18267/j.pep.602

Access Statistics for this article

Prague Economic Papers is currently edited by Klára Pavlová

More articles in Prague Economic Papers from Prague University of Economics and Business Contact information at EDIRC.
Bibliographic data for series maintained by Stanislav Vojir ().