Advanced Search
MyIDEAS: Login to save this paper or follow this series

Cross-ownership and unions in a Cournot duopoly: when profits reduce with horizontal product differentiation

Contents:

Author Info

  • Luciano Fanti
Registered author(s):

    Abstract

    Abstract 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 Info

    If 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.
    File URL: http://www.dse.ec.unipi.it/fileadmin/pdf/2011-128.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2011/128.

    as in new window
    Length:
    Date of creation: 11 Jan 2011
    Date of revision:
    Handle: RePEc:pie:dsedps:2011/128

    Contact details of provider:
    Postal: Via Cosimo Ridolfi, 10 - 56124 PISA
    Phone: +39 050 22 16 466
    Fax: +39 050 22 16 384
    Email:
    Web page: http://www.dse.ec.unipi.it
    More information through EDIRC

    Related research

    Keywords: Cross-ownership; Duopoly; Unions.;

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. repec:ebl:ecbull:v:15:y:2007:i:6:p:1-8 is not listed on IDEAS
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. 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.
    10. 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.
    11. 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.
    12. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
    13. Bárcena Ruiz, Juan Carlos & Olaizola Ortega, María Norma, 2004. "Cost-Saving production technologies and strategic delegation," IKERLANAK 2004-12, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    14. 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.
    15. Ghosh, Arghya & Mitra, Manipushpak, 2010. "Comparing Bertrand and Cournot in mixed markets," Economics Letters, Elsevier, vol. 109(2), pages 72-74, November.
    16. Osano, Hiroshi, 1996. "Intercorporate shareholdings and corporate control in the Japanese firm," Journal of Banking & Finance, Elsevier, vol. 20(6), pages 1047-1068, July.
    17. Häckner, Jonas, 1999. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Research Papers in Economics 1999:9, Stockholm University, Department of Economics.
    18. 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.
    19. Reitman, David, 1994. "Partial Ownership Arrangements and the Potential for Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 313-22, September.
    20. 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.
    21. 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.
    22. 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.
    23. 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.
    24. 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.
    25. Juan Carlos Barcena-Ruiz & Norma Olaizola, 2007. "Cost-saving production technologies and partial ownership," Economics Bulletin, AccessEcon, vol. 15(6), pages 1-8.
    26. Rupayan Pal, 2010. "How Much Should You Own? Cross-ownership and Privatization," Working Papers id:2810, eSocialSciences.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:pie:dsedps:2011/128. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.