Abstract
In this paper we analyse the impact of changes in product market competition on wage outcomes in the presence of an open shop union. With less than full union membership, product market competition is shown to affect not only a unionised firm's profits but also its payoff in the event of a dispute. In contrast to the prediction of the standard model, increases in product market competition may now increase wage levels. The model is therefore able to accommodate the mixed empirical findings regarding the impact of product market competition on union wages.
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