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Optimal Contracts for Vertically Connected, Unionized Duopolies

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  • Thomas Grandner

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    (Department of Economics, Vienna University of Economics & B.A.)

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    Abstract

    In this paper a vertically structured duopolistic market with unionized price setting firms is analyzed. The form of the contract of the transactions between upstream and downstream firms can be linear pricing, franchising or vertical integration. It is known from literature (Irmen (1997)) that the price elasticity of the industry demand and the degree of product differentiation are the decisive factors in the determination of the profit maximizing form of the contract. In this paper it is shown that the bargaining power of the union is an additional factor. With a higher bargaining power linear pricing becomes less preferable.

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    Bibliographic Info

    Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp071.

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    Date of creation: Jul 2000
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    Handle: RePEc:wiw:wiwwuw:wuwp071

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    Web page: http://www.wu.ac.at/economics/en

    Related research

    Keywords: Vertical Integration; Trade Unions;

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    References

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    1. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
    2. Irmen, Andreas, 1997. "Note on duopolistic vertical restraints," European Economic Review, Elsevier, vol. 41(8), pages 1559-1567, August.
    3. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    4. Santoni, Michele, 1996. "Union-Oligopoly Sequential Bargaining: Trade and Industrial Policies," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 640-63, October.
    5. Dobson, Paul W., 1994. "Multifirm unions and the incentive to adopt pattern bargaining in oligopoly," European Economic Review, Elsevier, vol. 38(1), pages 87-100, January.
    6. Vannetelbosch, V. J., . "Wage bargaining with incomplete information in an unionized Cournot oligopoly," CORE Discussion Papers RP -1303, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Bonanno, Giacomo & Vickers, John, 1988. "Vertical Separation," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 257-65, March.
    8. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
    9. Lin, Y Joseph, 1988. "Oligopoly and Vertical Integration: Note," American Economic Review, American Economic Association, vol. 78(1), pages 251-54, March.
    10. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers 548, Massachusetts Institute of Technology (MIT), Department of Economics.
    11. De Fraja, Giovanni, 1993. "Staggered vs. synchronised wage setting in oligopoly," European Economic Review, Elsevier, vol. 37(8), pages 1507-1522, December.
    12. Corneo, Giacomo, 1995. "National wage bargaining in an internationally integrated product market," European Journal of Political Economy, Elsevier, vol. 11(3), pages 503-520, September.
    13. Petrakis, Emmanuel & Vlassis, Minas, 2000. "Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment?," Labour Economics, Elsevier, vol. 7(3), pages 261-281, May.
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    Cited by:
    1. Theresa Grafeneder-Weissteiner, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Papers wuwp132, Vienna University of Economics, Department of Economics.
    2. Engelbert Stockhammer & Paul Ramskogler, 2009. "Post-Keynesian economics How to move forward," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 6(2), pages 227-246.
    3. Theresa Grafeneder-Weissteiner & Klaus Prettner, 2009. "Agglomeration and population aging in a two region model of exogenous growth," Department of Economics Working Papers wuwp125, Vienna University of Economics, Department of Economics.

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