Cross-ownership and unions in a Cournot duopoly: when profits reduce with horizontal product differentiation
AbstractAbstract Motivated by the widespread presence both of decentralised unions and cross-participation at ownership level (for instance in Japan and US), this paper aims at investigating whether the conventional wisdom that a reduction in the degree of product differentiation (which increases competition) always reduces firms’ profits, remains true in a differentiated duopoly extended with both equity participation of one firm in another firm and risk-neutral (or risk-averse) decentralised monopoly unions. We show that such a common wisdom, while it holds when either unions or crossownership separately exist, is reversed for a fairly low degree of product differentiation and large percentage of cross-ownership when both unions and crossownership are in existence: this is because the interaction between the reduced employment due to cross-ownership and the moderation of wage claims due to the menaces for employment, both magnified by increasing product market competition, works to increase profits more than how the latter are reduced by a higher competition.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2011/128.
Date of creation: 11 Jan 2011
Date of revision:
Cross-ownership; Duopoly; Unions.;
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L4 - Industrial Organization - - Antitrust Issues and Policies
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- repec:ebl:ecbull:v:15:y:2007:i:6:p:1-8 is not listed on IDEAS
- Luciano Fanti & Nicola Meccheri, 2010.
"The Cournot-Bertrand Profit Differential in a Differentiated Duopoly with Unions and Labour Decreasing Returns,"
Working Paper Series
36_10, The Rimini Centre for Economic Analysis.
- Luciano Fanti & Nicola Meccheri, 2011. "The Cournot-Bertrand profit differential in a differentiated duopoly with unions and labour decreasing returns," Economics Bulletin, AccessEcon, vol. 31(1), pages 233-244.
- Luciano Fanti & Nicola Meccheri, 2010. "The Cournot-Bertrand profit differential in a differentiated duopoly with unions and labour decreasing returns," Discussion Papers 2010/107, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
- Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 197-225.
- Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001.
"Collective wage setting when wages are generally binding An antitrust perspective,"
International Review of Law and Economics,
Elsevier, vol. 21(3), pages 287-307, September.
- Justus Haucap & Uwe Pauly & Christian Wey, 2000. "Collective Wage Setting When Wages Are Generally Binding: An Antitrust Perspective," CIG Working Papers FS IV 00-01, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Pisano, Gary P, 1989. "Using Equity Participation to Support Exchange: Evidence from the Biotechnology Industry," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 109-26, Spring.
- 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.
- Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July.
- Berglof, Erik & Perotti, Enrico, 1994. "The governance structure of the Japanese financial keiretsu," Journal of Financial Economics, Elsevier, vol. 36(2), pages 259-284, October.
- Iversen, Torben, 1998. "Wage Bargaining, Central Bank Independence, and the Real Effects of Money," International Organization, Cambridge University Press, vol. 52(03), pages 469-504, June.
- Henrick Horn & Asher Wolinsky, 1988.
"Bilateral Monopolies and Incentives for Merger,"
RAND Journal of Economics,
The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
- 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.
- Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
- Bárcena Ruiz, Juan Carlos & Olaizola Ortega, María Norma, 2004.
"Cost-Saving production technologies and strategic delegation,"
2004-12, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
- Juan Carlos B�Rcena-Ruiz & Norma Olaizola, 2006. "Cost-Saving Production Technologies And Strategic Delegation ," Australian Economic Papers, Wiley Blackwell, vol. 45(2), pages 141-157, 06.
- Inés Macho-Stadler & Thierry Verdier, 1991.
"Strategic managerial incentives and cross ownership structure: A note,"
Journal of Economics,
Springer, vol. 53(3), pages 285-297, October.
- Macho, I. & Verdier, T., 1989. "Strategic Managerial Incentives and Cross Ownership Structure: A Note," DELTA Working Papers 89-02, DELTA (Ecole normale supérieure).
- Ghosh, Arghya & Mitra, Manipushpak, 2010. "Comparing Bertrand and Cournot in mixed markets," Economics Letters, Elsevier, vol. 109(2), pages 72-74, November.
- Osano, Hiroshi, 1996. "Intercorporate shareholdings and corporate control in the Japanese firm," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 1047-1068, July.
- Häckner, Jonas, 1999.
"A Note on Price and Quantity Competition in Differentiated Oligopolies,"
Research Papers in Economics
1999:9, Stockholm University, Department of Economics.
- Hackner, Jonas, 2000. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Journal of Economic Theory, Elsevier, vol. 93(2), pages 233-239, August.
- David Gilo & Yossi Moshe & Yossi Spiegel, 2006. "Partial cross ownership and tacit collusion," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 81-99, 03.
- Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 313-22, September.
- Hiroshi Osano, 2011. "Partial Ownership and Strategic Alliances with Reallocation of Corporate Resources," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(2), pages 202-223, June.
- Pencavel, John H, 1984.
"The Tradeoff between Wages and Employment in Trade Union Objectives,"
The Quarterly Journal of Economics,
MIT Press, vol. 99(2), pages 215-31, May.
- John H. Pencavel, 1982. "The Trade-Off between Wages and Employment in Trade Union Objectives," NBER Working Papers 0870, National Bureau of Economic Research, Inc.
- Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-44, April.
- Rupayan Pal, 2012.
"How much should you own? Cross-ownership and privatization,"
Indira Gandhi Institute of Development Research, Mumbai Working Papers
2012-008, Indira Gandhi Institute of Development Research, Mumbai, India.
- Rupayan Pal, 2010. "How much should you own? Cross-ownership and privatization," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2010-015, Indira Gandhi Institute of Development Research, Mumbai, India.
- Luciano Fanti & Nicola Meccheri, 2011. "Do profits always decrease with decreasing product differentiation? A reversal result in a unionized duopoly," Discussion Papers 2011/112, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
- Juan Carlos Barcena-Ruiz & Norma Olaizola, 2007. "Cost-saving production technologies and partial ownership," Economics Bulletin, AccessEcon, vol. 15(6), pages 1-8.
- Rupayan Pal, 2010. "How Much Should You Own? Cross-ownership and Privatization," Working Papers id:2810, eSocialSciences.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.