The Impact of Trade Unions on Incentives to Deter Entry

Mathias Dewatripont

RAND Journal of Economics, 1988, vol. 19, issue 2, 191-199

Abstract: In this article I illustrate the impact of trade unions on strategic product market behavior. I discuss entry deterrence through capital durability in a model developed by Eaton and Lipsey. In the presence of unions, sunk capital scares away potential entrants but can also raise workers' bargaining power. Firms have thus to trade off these two effects in making their capital decisions. I analyze the impact of potential entry and unions on capital durability and welfare, and I discuss briefly the influence of unions on strategic product-market behavior in general.

Date: 1988
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