Strategic Budget Constraints of Public Firm under Bertrand Competition of Unionized Mixed Duopoly
AbstractThis paper investigates Bertrand competition of unionized mixed duopoly when the public firm is less efficient than the private firm, including endogenous imposition of the budget constraint on the public firm. Thus, we show that if the public firm's inefficiency is sufficiently small, no imposition of budget constraint is more likely to improve welfare and vice versa. Moreover, we suggest that in either budget constraint or non-budget constraint, the wages of the public firm can be smaller or larger than those of private firm depending upon the degree of inefficiency, which draws contrast to the finding of the previous literature. These results means that both the public firm and its union may or may not have different preferences with regard to the imposition of budget constraint depending upon both the degree of inefficiency and imperfect substitutability.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19969.
Date of creation: 12 Jan 2010
Date of revision:
Mixed Duopoly; Bertrand; Union; Budget Constraint; Inefficiency; Social Welfare.;
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
- H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
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