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Entry in a homogeneous Cournot-oligopoly is excessive if there is business stealing. This prediction assumes that production costs reduce profits and welfare equally. However, this need not be the case. If there is asymmetric information, suppliers or employees can utilize their superior knowledge to extract informational rents. Rent payments reduce profits and deter entry, but affect neither the optimal number of firms nor welfare directly. Therefore, entry becomes insufficient if informational rents are large enough. In the context of a moral hazard model, we show that insufficient entry occurs if entry costs are sufficiently high. Such costs lower the number of firms and, thereby, raise informational rents.

We consider a principal-agent relationship with adverse selection. Principals pay informational rents due to asymmetric information and sell their output in a homogeneous Cournot-oligopoly. We find that asymmetric information may mitigate or more than compensate the welfare reducing impact of market power, irrespective of whether the number of firms is given exogenously or determined endogenously by a profit constraint. We further show that welfare in a setting with adverse selection may be higher than the maximized welfare level attainable in a world with perfect observability.

Here we describe the case of a 60‐year‐old-woman with systemic sclerosis sent to our Scleroderma Unit to treat digital stumps. The stumps were successfully treated with autologous fat grafting (crown-shape infiltration). Our technique of autologous lipotransfer improved wound healing in a scleroderma patient with stump-digital ulcers where all other options failed.

How does cost uncertainty affect the welfare consequences of an oligopoly? To answer this question, we investigate a Cournot oligopoly in which firms produce a homogeneous commodity and market entry is feasible. Marginal costs are unknown ex-ante, i.e. prior to entering the market. They become public knowledge before output choices are made. We show that uncertainty induces additional entry in market equilibrium and also raises the socially optimal number of firms. Since the first change dominates, the excessive entry distortion is aggravated. This prediction is robust to various extensions of the analytical set-up. Furthermore, the welfare loss due to oligopoly tends to increase with uncertainty.

Trade unions are often argued to cause allocative inefficiencies and to lower welfare. We analyze whether this evaluation is also justified in a Cournot-oligopoly with free but costly entry. If input markets are competitive and output per firm declines with the number of firms (business stealing), there is excessive entry into such oligopoly. If trade unions raise wages above the competitive level, output and profits per firm decline, which could deter entry and thus improve welfare. We find that an increase in the union's bargaining power raises welfare if the (inverse) demand curve is (sufficiently) concave. We also show that collective bargaining loosens the linkage between business stealing and excessive entry.

In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises.

In a Cournot-oligopoly with free but costly entry and business stealing, output per firm is too low and the number of competitors excessive, assuming labor productivity to depend on the number of employees only or to be constant. However, a firm can raise the productivity of its workforce by paying higher wages. We show that such efficiency wages accentuate the distortions occurring in oligopoly. Specifically, excessive entry is aggravated and the welfare loss due to market power rises.

Empirical evidence suggests that the bargaining power of trade unions differs across firms and sectors. Standard models of unionization ignore this pattern by assuming a uniform bargaining strength. In this paper, we incorporate union heterogeneity into a Melitz (2003) type model. Union bargaining power is assumed to be firm-specific and varies with firm productivity. This framework allows us to re-analyze the labor market effects of (i) a symmetric increase in the bargaining power of all unions and (ii) trade liberalization. We show that union heterogeneity unambiguously reduces the negative employment effects of stronger unions. Firm-specific bargaining power creates a link between unionization and the entry and exit of firms, implying a reduction of the unions' expected bargaining power. Moreover, union heterogeneity constitutes an (un)employment effect of trade liberalization. If unions are most powerful in the high-productivity (low-productivity) firms, trade liberalization will increase (decrease) unemployment.

Empirical evidence suggests that high-productivity firms face stronger trade unions than low-productivity firms. Then a policy that puts all unions into a better bargaining position is no longer neutral for firm selection as in models with a uniform bargaining strength across firms. Using a Melitztype model, we show that firm selection becomes less severe. Since more low-productivity firms enter the market, the negative employment effect of unionization is mitigated. Neglecting inter-union differences in bargaining power leads to an overestimation of the negative labor market effects. However, trade liberalization increases unemployment because firms with the least powerful labor unions have to leave the market.

This paper examines the decision-making process of students from an economic perspective in order to understand what determines an individual's willingness to provide effort. Our theoretical model predicts that ability and job market prospects are positive determinants. Analyzing a novel dataset on thousands of German students, however, we instead find that ability has a significantly negative effect on effort. It seems that the marginal gain of increasing effort in terms of higher expected income after studying is lower for high-ability students compared to low-ability students. In regard to the second determinant, the evidence rejects a similar argument, according to which great job market prospects may impair student effort. Applying an instrumental variable approach based on official unemployment data on regional labor markets, we can confirm our prediction on the positive role of perceived employment prospects in actual student behavior.

How does an increase in unionization costs, i.e. costs which arise when workers are organized by a union, affect the productivity distribution of active firms, wage inequality and welfare? In this paper, we build a model with costly, endogenous unionization, heterogeneous firms as well as free market entry/exit. If unionization costs are relatively low (high), we find that an increase in these costs decreases (increases) average productivity and welfare decreases (increases). Additionally, we find a hump-shaped relationship between unionization costs and wage inequality. These results suggest that policies aiming to reduce unionization could worsen economic performance.