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Equilibrium Mode of Competition in Unionized Oligopolies: Do Unions Act as Commitment Devices to Cournot Outcomes?

Author

Listed:
  • Constantine Manasakis

    (Department of Economics, University of Crete)

  • Minas Vlassis

    (Department of Economics, University of Crete)

Abstract

In contrast with previous studies, we postulate that there is no ex-ante commitment over the type of contract (i.e., price or quantity) which a firm offers consumers. In the context of a unionized symmetric duopoly we instead argue that the mode of competition which in equilibrium emerges is the one that entails the most beneficial outcome for both the firm and its labour union, in each firm/union pair, given the choice of the rival pair. Our findings suggest that monopoly unions with risk-averse/neutral members may effectively act as commitment devices driving firms to the symmetric Cournot mode of competition.

Suggested Citation

  • Constantine Manasakis & Minas Vlassis, 2006. "Equilibrium Mode of Competition in Unionized Oligopolies: Do Unions Act as Commitment Devices to Cournot Outcomes?," Working Papers 0603, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:0603
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    File URL: http://economics.soc.uoc.gr/wpa/docs/Manasakis-Vlassis_Unions_Mode_of_Comp.pdf
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    References listed on IDEAS

    as
    1. Dastidar, Krishnendu Ghosh, 1997. "Comparing Cournot and Bertrand in a Homogeneous Product Market," Journal of Economic Theory, Elsevier, vol. 75(1), pages 205-212, July.
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    3. Lambertini, Luca, 1997. "Prisoners' Dilemma in Duopoly (Super)Games," Journal of Economic Theory, Elsevier, vol. 77(1), pages 181-191, November.
    4. Lopez, Monica Correa & Naylor, Robin A., 2004. "The Cournot-Bertrand profit differential: A reversal result in a differentiated duopoly with wage bargaining," European Economic Review, Elsevier, vol. 48(3), pages 681-696, June.
    5. Paul Klemperer & Margaret Meyer, 1986. "Price Competition vs. Quantity Competition: The Role of Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 618-638, Winter.
    6. Leonard Cheng, 1985. "Comparing Bertrand and Cournot Equilibria: A Geometric Approach," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 146-152, Spring.
    7. Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
    8. Amir, Rabah & Jin, Jim Y., 2001. "Cournot and Bertrand equilibria compared: substitutability, complementarity and concavity," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 303-317, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kangsik, Choi, 2008. "Cournot-Bertrand competition in a unionized mixed duopoly," MPRA Paper 12787, University Library of Munich, Germany, revised 26 Dec 2008.
    2. Choi, Kangsik, 2008. "Comparing Cournot and Bertrand Competition in a Unionized Mixed Duopoly," MPRA Paper 15468, University Library of Munich, Germany, revised 27 May 2009.

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    More about this item

    Keywords

    Oligopoly; Monopoly unions; Equilibrium mode of competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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