Entry in Telecommunication: Customer Loyalty, Price Sensitivity and Access Prices

The purpose of this article is to investigate the prospects for entry into an existing network in the telecommunication industry, and how public policy may promote a more competitive outcome. We apply a model that captures the fact that the incumbent has an installed base of loyal consumers, some consumers are price sensitive, and the entrant is charged an access fee for entering the network. We distinguish between classical (de novo) entry and reciprocal entry (incumbent entering the neighbouring market), and analyse how such public policy measures as (i) publication of prices by the authorities and (ii) lower access fees affect the competitive outcome. In the reciprocal entry model we find that lower access fees tend to discourage entry into a neighbouring market, while the publishing of prices has an ambiguous effect on entry.collusion; entry; access fee; telecommunication

Love and taxes - and matching institutions

We study a setting with search frictions in the marriage market and with incomplete contracting inside the family. Everyone prefers a partner that has high income and is a perfect emotional match, but compromises must often be struck. A high income earner may abstain from marrying a low-income earner even though they would be a per- fect match emotionally, because the high-income earner may dislike the implicit income redistribution implied by the marriage. Redistributive income taxation may ease this problem. Income matching institutions that secure that people largely from the same income groups meet each other can substitute for redistribution, so that optimal redistribution is reduced. We also introduce a divorce option. Redistributive taxation is shown both to further and stabilize marriage.marriage; optimal taxation; emotional rents; love; incomplete contracts; assortative mating; divorce

Love and taxes - and matching institutions

We study a setting with search frictions in the marriage market and with incomplete contracting inside the family. Everyone prefers a partner that has high income and is a perfect emotional match, but compromises must often be struck. A high income earner may abstain from marrying a low-income earner even though they would be a perfect match emotionally, because the highincome earner may dislike the implicit income redistribution implied by the marriage. Redistributive income taxation may ease this problem. Income matching institutions that secure that people largely from the same income groups meet each other can substitute for redistribution, so that optimal redistribution is reduced. We also introduce a divorce option. Redistributive taxation is shown both to further and stabilize marriage. -- Wenn Menschen mit unterschiedlichem Einkommen heiraten, führt dies zu einer Umverteilung innerhalb der Ehe von der wirtschaftlich stärkeren zur wirtschaftlich schwächeren Person. Zwei Personen, die zufällig aufeinander treffen und aufgrund ähnlicher Interessen und Neigungen gut zueinander passen, werden auch die finanziellen Folgen einer Heirat berücksichtigen. Falls die Person mit hohem Einkommen diese Umverteilung als zu stark empfindet, kommt die Ehe nicht zustande. Die Rente, die z.B. dadurch entsteht, dass das Paar ähnliche Interessen hat oder gemeinsamen Hobbys nachgehen kann, geht in diesem Fall verloren. Progressive Besteuerung führt zu einer Angleichung der Einkommensverteilung und verringert daher die Wahrscheinlichkeit, dass Ehen aufgrund hoher Einkommensunterschiede nicht zustande kommen. Aus wohlfahrtstheoretischer Sicht ist dies ein positiver Aspekt umverteilender Besteuerung, der bisher in der Literatur nicht berücksichtigt wurde. Die optimale Höhe der Besteuerung hängt von den Matching-Institutionen ab, d.h. davon wer wen auf dem Heiratsmarkt trifft. Treffen vorwiegend Personen mit unterschiedlichem Einkommen und ähnlichen Interessen aufeinander, ist der positive Effekt der Besteuerung besonders wirksam. In diesem Fall ist der optimale Steuersatz umso höher, je ähnlicher die Interessen der potentiellen Partner ist. Umgekehrt kann progressive Besteuerung in einer Gesellschaft, in der vorwiegend Personen mit ohnehin ähnlichem Einkommen aufeinandertreffen, kaum etwas bewirken. Daher fällt in diesem Fall der optimale Steuersatz umso geringer aus, je ähnlicher die Einkommen der potentiellen Paare auf dem Heiratsmarkt sind.Marriage,optimal taxation,emotional rents,love,incomplete contracts,assortative mating,divorce

Technology resistance and globalisation with trade unions: the choice between employment protection and flexicurity

We analyse how different labour market institutions — employment protection versus ‘flexicurity’ — affect technology adoption in unionised firms. The analysis is cast in a setting of corporate globalisation, where domestic unionised labour face the double threat of labour-saving technological innovations and international outsourcing of domestic production. In the main part of the analysis, we analyse trade unions’ incentives to oppose or endorse the adoption of new technology. Our main result is that both weaker employment protection and a higher reservation wage for unionsed workers (interpreted as increased ‘flexicurity’) contribute to making trade unions more willing to accept labour-saving technological change. Furthermore, these effects are reinforced by globalisation. In an extension to the main analysis, we endogenise the technological progress by studying firms’ incentives to invest in new technology and find that these incentives are also generally strengthened in a labour market with more ‘flexicurity’.Technology adoption; Globalisation, Trade unions, Employment protection, Flexicurity

Employment Protection versus Flexicurity: On Technology Adoption in Unionised Firms

We analyse how different labour market institutions - employment protection versusflexicurity - affect technology adoption in unionised firms. We consider both trade unions’ incentives to oppose or endorse labour-saving technology, and firms’ incentives to invest in such technology. We find that increased flexicurity – interpreted as less employment protection and a higher reservation wage for workers - unambiguously increase firms’ incentives for technology adoption, even when taking into account the response in unionised wage setting to such new technology. If we assume that unions have some direct influence over the technology to be adopted, a higher reservation wage also makes unions more willing to accept technological change. Less employment protection has the opposite effect, since this increases the downside (job losses) of labour-saving technology.technology adoption, trade unions, employment protection, flexicurity

Technology resistance and globalisation with trade unions: the choice between employment protection and flexicurity

We analyse how different labour market institutions — employment protection versus ‘flexicurity’ — affect technology adoption in unionised firms. The analysis is cast in a setting of corporate globalisation, where domestic unionised labour face the double threat of labour-saving technological innovations and international outsourcing of domestic production. In the main part of the analysis, we analyse trade unions’ incentives to oppose or endorse the adoption of new technology. Our main result is that both weaker employment protection and a higher reservation wage for unionsed workers (interpreted as increased ‘flexicurity’) contribute to making trade unions more willing to accept labour-saving technological change. Furthermore, these effects are reinforced by globalisation. In an extension to the main analysis, we endogenise the technological progress by studying firms’ incentives to invest in new technology and find that these incentives are also generally strengthened in a labour market with more ‘flexicurity’.Technology adoption; Globalisation; Trade unions; Employment protection; Flexicurity.

North-South Technology Transfer in Unionised Multinationals

We study how incentives for North-South technology transfers in multinational enterprises are affected by labour market institutions. If workers are collectively organised, incentives for technology transfers are partly governed by firms’ desire to curb trade union power. This will affect not only the extent but also the type of technology transfer. While skill upgrading of southern workers benefits these workers at the expense of northern worker welfare, quality upgrading of products produced in the South may harm not only northern but also southern workers. A minimum wage policy to raise the wage levels of southern workers may spur technology transfer, possibly to the extent that the utility of northern workers decline. These conclusions are reached in a setting where a unionised multinational multiproduct firm produces two vertically differentiated products in northern and southern subsidiaries, respectively.North-South technology transfer, multinationals, trade unions, minimum wages

Good jobs, bad jobs and redistribution

We analyse the question of optimal taxation in a dual economy, when the government is concerned about the distribution of labour income. Income inequality is caused by the presence of sunk capital investments, which creates a .good jobs. sector due to the capture of quasi-rents by trade unions. We find that whether the government should subsidise or tax investments is crucially dependent on union bargaining strength. If unions are weak, the optimal tax policy implies a combination of investment taxes and progressive income taxation. On the other hand, if unions are strong, we find that the best option for the government is to use investment subsidies in combination with either progressive or proportional taxation, the latter being the optimal policy if the government is not too concerned about inequality and if the cost of income taxation is sufficiently high. -- In dem Beitrag wird die Frage der optimalen Besteuerung in einer Wirtschaft mit zwei Sektoren untersucht, in der die Regierung an der Verteilung des Arbeitseinkommens interessiert ist. Einkommensungleichheit wird dann durch versunkene Kapitalinvestitionen verursacht, die einen Sektor mit .guten. Arbeitsplätzen schaffen, der durch die Aneignung von Quasi-Renten durch Gewerkschaften entsteht. Ob die Regierung Investitionen subventionieren oder besteuern soll, hängt entscheidend von der Verhandlungsst ärke der Gewerkschaften ab. Wenn die Gewerkschaften schwach sind, dann sieht die optimale Steuerpolitik eine Kombination aus Investitionssteuern und progressiver Einkommensbesteuerung vor. Im Falle von starken Gewerkschaften zeigt sich, daß die beste Handlungsalternative für die Regierung aus dem Einsatz von Subventionen in Kombination mit entweder progressiver oder proportionaler Besteuerung besteht, wobei die letztere dann optimal ist, wenn die Regierung nicht zu sehr an Ungleichheit interessiert ist und wenn die Kosten der Einkommensbesteuerung hinreichend hoch sind.Rent sharing,segmented labour markets,optimal taxation,redistribution

Globalisation and union opposition to technological change

We find that trade unions have a rational incentive to oppose the adoption of labour-saving technology when labour demand is inelastic and unions care much for employment relative to wages. Trade liberalisation typically increases trade union technology opposition. These conclusions are reached in a model of international duopoly with monopoly wage setting in one of the countries, and two-way trade. An important stepping stone for the result is to note that even though trade liberalisation means a tougher competitive environment for firms, labour demand tends to increase. We also find that the incentive for technology opposition is stronger in the more technologically advanced country and in the country with the larger home market, complementing earlier explanations for technological catch-up and leapfrogging.Trade liberalisation; technology adoption; international unionised oligopoly.