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Title:Raising rivals' fixed (labor) costs: The Deutsche Post case PDF Logo
Authors:Heitzler, Sven
Wey, Christian
Issue Date:2010
Series/Report no.:Discussion papers // German Institute for Economic Research 1008
Abstract:We analyze the bargaining problem of an incumbent firm and a union when the wage contract becomes generally binding. Our main application relates to competition among operators of mail delivery networks. We describe the Deutsche Post case which highlights the raising rivals' costs incentive and its consequences resulting from labor laws that make collective agreements generally binding. We show that minimum wages implemented by means of extension regulation are an effective deterrence instrument which frustrates both market entry as well as investments into the build-up of a mail delivery network.
Subjects:Minimum wages
postal services
collective bargaining
raising rivals' costs
Document Type:Working Paper
Appears in Collections:DIW Diskussionspapiere
Publikationen von Forscherinnen und Forschern des DIW Berlin

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