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http://ssrn.com/abstract=1639785
 
 

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Raising Rivals' Fixed (Labor) Costs: The Deutsche Post Case


Sven Heitzler


Detecon; German Institute for Economic Research (DIW Berlin)

Christian Wey


University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE)

May 2010

DIW Berlin Discussion Paper No. 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.

Number of Pages in PDF File: 33

Keywords: Minimum wages, postal services, collective bargaining, raising rivals' costs

JEL Classification: L12, J52, K31

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Date posted: September 23, 2010  

Suggested Citation

Heitzler, Sven and Wey, Christian, Raising Rivals' Fixed (Labor) Costs: The Deutsche Post Case (May 2010). DIW Berlin Discussion Paper No. 1008. Available at SSRN: http://ssrn.com/abstract=1639785 or http://dx.doi.org/10.2139/ssrn.1639785

Contact Information

Sven Heitzler (Contact Author)
Detecon ( email )
Sternengasse 14 - 16
Cologne, 50676
Germany
HOME PAGE: http://www.detecon.com
German Institute for Economic Research (DIW Berlin) ( email )
Mohrenstraße 58
Berlin, 10117
Germany
Christian Wey
University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE) ( email )
Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
+49-211-81-15009 (Phone)
+49-211-81-15499 (Fax)
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