On Product Differentiation and Profits in Unionized Duopolies
AbstractThis work aims to investigate if the conventional wisdom, that a decrease in the degree of product differentiation always reduces firms’ profits, remains true in a differentiated duopoly model with decentralized, or firm-specific, monopoly unions. It is shown that, provided that unions are sufficiently wage-oriented, that is, they sufficiently prefer wages to employment, the conventional result can actually be reversed under both Cournot and Bertrand competition, implying that incentives for firms towards less differentiation may arise. Moreover, the range of product differentiation values, for which the “reversal result” applies, is larger when firms compete in quantities than in prices.
Download InfoIf 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.
Bibliographic InfoPaper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 37_11.
Date of creation: Jul 2011
Date of revision:
unionized duopoly; product differentiation; profits;
Find related papers by 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-21 (All new papers)
- NEP-BEC-2011-07-21 (Business Economics)
- NEP-COM-2011-07-21 (Industrial Competition)
- NEP-IND-2011-07-21 (Industrial Organization)
- NEP-LAB-2011-07-21 (Labour Economics)
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.:
- 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.
- 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.
- Piercarlo Zanchettin, 2006. "Differentiated Duopoly with Asymmetric Costs," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 999-1015, December.
- 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.
- Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
- Naylor, Robin A., 2002. "Industry profits and competition under bilateral oligopoly," Economics Letters, Elsevier, vol. 77(2), pages 169-175, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roberto Patuelli).
If references are entirely missing, you can add them using this form.