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.
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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)
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- Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
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