Optimal Contracts for Vertically Connected, Unionized Duopolies
AbstractIn 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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Date of creation: Jul 2000
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Vertical Integration; Trade Unions;
Find related papers by JEL classification:
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-10-11 (All new papers)
- NEP-IND-2000-10-11 (Industrial Organization)
- NEP-LAB-2000-10-11 (Labour Economics)
- NEP-REG-2000-10-11 (Regulation)
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