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Union Bargaining in an Oligopoly Market with Cournot-Bertrand Competition: Welfare and Policy Implications

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  • Elizabeth Schroeder

    ()
    (Department of Economics, Oregon State University, Corvallis, OR, 97331-3612, USA)

  • Victor J. Tremblay

    ()
    (Department of Economics, Oregon State University, Corvallis, OR, 97331-3612, USA)

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    Abstract

    We investigate the welfare effect of union activity in a relatively new oligopoly model, the Cournot-Bertrand model, where one firm competes in output ( a la Cournot) and the other firm competes in price ( a la Bertrand). The Nash equilibrium prices, outputs, and profits are quite diverse in this model, with the competitive advantage going to the Cournot-type competitor. A comparison of the results from the Cournot-Bertrand model with those found in the traditional Cournot and Bertrand models reveals that firms and the union have a different preference ordering over labor market bargaining. These differences help explain why the empirical evidence does not support any one model of union bargaining. We also examine the welfare and policy implications of union activity in a Cournot-Bertrand setting.

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    Bibliographic Info

    Article provided by MDPI, Open Access Journal in its journal Economies.

    Volume (Year): 2 (2014)
    Issue (Month): 2 (March)
    Pages: 95-108

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    Handle: RePEc:gam:jecomi:v:2:y:2014:i:2:p:95-108:d:34428

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    Related research

    Keywords: Cournot-Bertrand model; union bargaining;

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    1. Beath,John & Katsoulacos,Yannis, 1991. "The Economic Theory of Product Differentiation," Cambridge Books, Cambridge University Press, number 9780521335522, April.
    2. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    3. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    4. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
    5. Petrakis, Emmanuel & Vlassis, Minas, 2000. "Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment?," Labour Economics, Elsevier, vol. 7(3), pages 261-281, May.
    6. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    7. Tremblay, Carol Horton & Tremblay, Victor J., 2011. "The Cournot-Bertrand model and the degree of product differentiation," Economics Letters, Elsevier, vol. 111(3), pages 233-235, June.
    8. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    9. Victor J. Tremblay & Carol Horton Tremblay & Kosin Isariyawongse, 2013. "Endogenous Timing And Strategic Choice: The Cournot-Bertrand Model," Bulletin of Economic Research, Wiley Blackwell, vol. 65(4), pages 332-342, October.
    10. Beath,John & Katsoulacos,Yannis, 1991. "The Economic Theory of Product Differentiation," Cambridge Books, Cambridge University Press, number 9780521335263, April.
    11. Nicholas Lawson, 2011. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Journal of Labor Research, Springer, vol. 32(3), pages 282-304, September.
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