Product market cooperation, profits and welfare in the presence of labor union

It is believed that cooperation between the final goods producers hurts consumers and reduces social welfare but increases profits. We show that these results may not hold in the presence of a unionized labor market. The effects of product market cooperation on consumers, profits and social welfare may depend on the union's disagreement utility, its bargaining power and the degree of product market cooperation. © Springer Science+Business Media, LLC 2010.