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

CEPR Discussion Paper Series No. 1912

Posted: 12 Jan 1999

See all articles by Damien J. Neven

Damien J. Neven

University of Geneva; Centre for Economic Policy Research (CEPR)

Lars-Hendrik Röller

ESMT European School of Management and Technology; Centre for Economic Policy Research (CEPR); WZB Berlin Social Science Center - Competitiveness and Industrial Change

Zhaoyong Zhang

National University of Singapore

Date Written: June 1998

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.

JEL Classification: L40, L93

Suggested Citation

Neven, Damien J. and Röller, Lars-Hendrik and Zhang, Zhaoyong, Union Power and Product Market Competition: Evidence from the Airline Industry (June 1998). CEPR Discussion Paper Series No. 1912, Available at SSRN: https://ssrn.com/abstract=137232

Damien J. Neven (Contact Author)

University of Geneva ( email )

Graduate Institute of International Studies
CH-1211 Geneve 4
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Lars-Hendrik Röller

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin, 10178
Germany

HOME PAGE: http://www.esmt.org/eng/faculty-research/lars-hendrik-roeller/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

WZB Berlin Social Science Center - Competitiveness and Industrial Change ( email )

Reichpietschufer 50
10785 Berlin
Germany
+49 30 2549 1440 (Phone)
+49 30 2549 1442 (Fax)

Zhaoyong Zhang

National University of Singapore ( email )

10 Kent Ridge Crescent
Singapore 119260
Republic of Singapore

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