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Comparing Cournot and Bertrand Competition in a Unionized Mixed Duopoly

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Author Info
Choi, Kangsik
Abstract

We investigate a differentiated mixed duopoly in which private and public firms can choose to strategically set prices or quantities by facing a union bargaining process. For the case of a unionized mixed duopoly, only the public firm is able to choose a type of contract irrespective of whether the goods are substitutes or complements in the equilibrium. Thus, we show that social welfare under Bertrand competition is always determined by the public firm's dominant strategy, wherein the Bertrand competition entails higher social welfare than the Cournot competition. Moreover, there are multiple Nash equilibria in the contract stage of the game. Finally, our main results hold irrespective of the nature of goods, with the exception of when a sufficiently large parameter of complements is employed, the ranking of private firm's profit is not reversed, which is contrast to the standard findings.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15468.

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Date of creation: 25 Sep 2008
Date of revision: 27 May 2009
Handle: RePEc:pra:mprapa:15468

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Related research
Keywords: Wage Bargaining; Union; Cournot-Bertrand Competition; Mixed Duopoly.;

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Find related papers by JEL classification:
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
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets

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    Other versions:
  9. Arijit Mukherjee & Kullapat Suetrong, . "Unionisation structure and strategic foreign direct investment," Discussion Papers 07/22, University of Nottingham, GEP. [Downloadable!]
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    Other versions:
  11. 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. [Downloadable!] (restricted)
  12. Okuguchi, Koji, 1987. "Equilibrium prices in the Bertrand and Cournot oligopolies," Journal of Economic Theory, Elsevier, vol. 42(1), pages 128-139, June. [Downloadable!] (restricted)
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