PRODUCT SELECTION AND COSTS IN A PARTIALLY UNIONIZED INDUSTRY

This paper examines differences in costs among union and nonunion firm s operating in the multiple and competitive lumber markets; develops a model of output and product selection decisions; and then estimates t he cost function implied by the model for a sample of sawmills that pr oduce green and dry lumber. Overall, the average variable costs for th e green technology are about 67 percent higher for union mills and, fo r the dry technology, costs are about 30 percent higher. However, diff erences in minimum average variable costs are negligible in the dry ma rket but are significant in the green market. The results suggest that some union mills may be able to coexist with nonunion mills in a comp etitive industry by specializing in market niches determined by compar ative cost advantages.