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Wage bargaining and vertical differentiation

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  • Emanuele Bacchiega

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Abstract

This article intends to apply the Nash Bargaining solution to wage setting in a vertically differentiated oligopoly and to study its welfare effects. The market outcome crucially depends on the bargaining power attributed to the agents. I show that the resulting wage bargaining structure is likely to lead to another source of distortion that adds to the classical one derived by oligopoly pricing and quality choice.

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File URL: http://hdl.handle.net/10.1007/s12232-007-0005-6
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Bibliographic Info

Article provided by Springer in its journal International Review of Economics.

Volume (Year): 54 (2007)
Issue (Month): 1 (March)
Pages: 35-52

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Handle: RePEc:spr:inrvec:v:54:y:2007:i:1:p:35-52

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Web page: http://www.springer.com/economics/journal/12232

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Related research

Keywords: vertical differentiation; worker’ skills; wage bargaining; welfare;

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References

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  1. BOCCARD, Nicolas & WAUTHY, Xavier, 2009. "Regulating quality by regulating quantity : a case against minimum quality standards," CORE Discussion Papers 2009052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  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. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
  4. Aoki, Reiko & Prusa, Thomas J., 1997. "Sequential versus simultaneous choice with endogenous quality," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 103-121, February.
  5. Jean Gabszewicz & Alessandro Turrini, 1999. "Workers' Skills and Product Selection," Revue Économique, Programme National Persée, vol. 50(3), pages 383-391.
  6. Coles, Melvyn G & Hildreth, Andrew, 1996. "Wage Bargaining, Inventories, and Union Legislation," CEPR Discussion Papers 1361, C.E.P.R. Discussion Papers.
  7. Enrico Pennings, . "Optimal pricing and quality choice when investment in quality is irreversible," Working Papers 206, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  8. Joan Martín-Montaner & Vicente Ríos, 2002. "Vertical specialization and intra-industry trade: The role of factor endowments," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 340-365, June.
  9. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  10. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  11. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  12. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
  13. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
  14. Webster, Allan, 1993. "The Skill and Higher Educational Content of UK Net Exports," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(2), pages 141-59, May.
  15. Thomson, W., 1989. "Cooperative Models Of Bargaining," RCER Working Papers 177, University of Rochester - Center for Economic Research (RCER).
  16. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
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Citations

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Cited by:
  1. E. Bacchiega & E. Randon & L. Zirulia, 2010. "Strategic Accessibility Competition," Working Papers 696, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. BACCHIEGA, Emanuele, 2004. "Vertical differentiation, wage bargaining and intra-industry trade liberalization," CORE Discussion Papers 2004028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. E. Bacchiega & A. Minniti, 2013. "Training and Product Quality in Unionized Oligopolies," Working Papers wp871, Dipartimento Scienze Economiche, Universita' di Bologna.

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