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

Author

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  • Neven, Damien J
  • Röller, Lars-Hendrik
  • Zhang, Zhentang
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.

Suggested Citation

  • Neven, Damien J & Röller, Lars-Hendrik & Zhang, Zhentang, 1998. "Union Power and Product Market Competition: Evidence from the Airline Industry," CEPR Discussion Papers 1912, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1912
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    Cited by:

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    2. Kauppi, Heikki & Koskela, Erkki & Stenbacka, Rune, 2004. "Equilibrium Unemployment and Investment Under Product and Labour Market Imperfections," IZA Discussion Papers 1058, Institute of Labor Economics (IZA).
    3. Heikki Kauppi & Erkki Koskela & Rune Stenbacka, 2004. "Equilibrium Unemployment and Capital Intensity Under Product and Labor Market Imperfections," CESifo Working Paper Series 1343, CESifo.
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    6. Gundelfinger, Javier & Coto-Millán, Pablo, 2020. "Price and demand behaviors in the Scandinavian airline industry following market liberalization," Utilities Policy, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Airline Industry; Efficiency; market power; rent sharing; union power;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation

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