Efficient bargaining versus right to manage: a stability analysis with heterogeneous players in a duopoly with quantity competition and trade unions
AbstractThe present study considers a unionised duopoly with the two most popular labour market institutions, i.e. efficient bargaining (EB) and right to manage (RTM) unions and analyses product market stability under quantity competition. By focusing on the role played by labour market institutions on the market dynamics, we show that when the preference of unions towards wages is fairly low, (i) the stability region under RTM is higher than under EB, and (ii) a rise in the union power in the Nash bargaining monotonically increases (reduces) the parametric stability region under RTM (EB). In contrast, when the preference of unions towards wages becomes higher, an increase in the union’s bargaining power acts: (1) as an economic stabiliser when the union power is still low; (2) as an economic de-stabiliser when the union power is already high. These results shed some light on the effects of how labour market structures affect out-of equilibrium behaviours in a duopoly in addition to the many established results on how they affect equilibrium behaviours in such a context, and thus also constitute policy warnings for the design of the labour market institutions as regards the important issue of economic stability.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 34434.
Date of creation: 01 Nov 2011
Date of revision:
Bifurcation; Cournot; Duopoly; Efficient bargaining; Right to manage;
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
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-07 (All new papers)
- NEP-BEC-2011-11-07 (Business Economics)
- NEP-GTH-2011-11-07 (Game Theory)
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