Welfare effects of cross-ownership in a unionised duopoly

• Autores: Luciano Fanti
• Localización: Economia e Politica Industriale, ISSN 0391-2078, ISSN-e 1972-4977, Vol. 41, Nº. 2, 2014, págs. 21-41
• Idioma: inglés
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• Resumen

  • 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.