A model of monopoly and “efficient” unions with endogenous union coverage: Positive and normative implications |
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Authors: | Brian Chezum John Garen |
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Institution: | (1) Simpson College, 50125 Indianola, IA;(2) University of Kentucky, 40506 Lexington, KY |
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Abstract: | We present a model of a rent-maximizing union that organizes to increase its coverage of an industry and analyze monopoly
and “efficient” unions in this setting. Our model is unique in that we allow for a competitive industry with free entry and
find union and nonunion firms coexisting with product market equilibrium. This is achieved by incorporating the insight that
firms are heterogeneous in productive characteristics. An important implication of our model is that an “efficient” union
that covers a nontrivial share of the market is not efficient and may in fact be less efficient than a monopoly union. |
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