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The Cournot-Bertrand Profit Differential in a Differentiated Duopoly with Unions and Labour Decreasing Returns

Author

Listed:
  • Luciano Fanti

    (Department of Economics, University of Pisa, Italy)

  • Nicola Meccheri

    (Department of Economics, University of Pisa, Italy; The Rimini Centre for Economic Analysis (RCEA), Italy)

Abstract

This paper compares Cournot and Bertrand equilibria in a differentiated duopoly (with imperfect substitutes), total wage bill maximizing unions and labour decreasing returns. It is shown that the standard result, that equilibrium profits are always higher under Cournot, may be reversed even for a fairly low degree of product differentiation. Moreover, the presence of labour decreasing returns tends to reinforce the mechanisms that contribute to the reversal result, making this event possible for a wider range of situations, with respect to those identified by the earlier literature.

Suggested Citation

  • 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, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:36_10
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    References listed on IDEAS

    as
    1. 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.
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    More about this item

    Keywords

    Cournot-Bertrand profit differential; unions; labour decreasing returns;
    All these keywords.

    JEL classification:

    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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