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

33 Pages Posted: 23 Sep 2010  

Sven Heitzler

Detecon; German Institute for Economic Research (DIW Berlin)

Christian Wey

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

Date Written: May 2010

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.

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

JEL Classification: L12, J52, K31

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: https://ssrn.com/abstract=1639785 or http://dx.doi.org/10.2139/ssrn.1639785

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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