Union Power and Product Market Competition: Evidence from the Airline Industry

Damien Neven, Lars-Hendrik Röller and Zhentang Zhang

No 1912, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this paper, we specify and estimate a structural model, which links product market competition and union power. The model has a two-stage setting, in which wages are determined through bargaining between management and unions in the first stage, with a price-setting market game to follow in the second stage. Using data for eight European airlines from 1976–94, we provide evidence on price-cost margins and the measurement of market power in a model of rent sharing. In particular, we find that rent sharing reduces firms’ profits more than it does consumers’ surplus. As a consequence the static impact of unions is more on equity rather than efficiency.

Keywords: Airline Industry; Efficiency; market power; rent sharing; union power (search for similar items in EconPapers)
JEL-codes: L40 L93 (search for similar items in EconPapers)
Date: 1998-06
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Citations: View citations in EconPapers (1)

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Working Paper: Union Power and Product Market Competition: Evidence from the Airline Industry (1998)
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