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On the Cournot–Bertrand Profit Differential and the Structure of Unionisation in a Managerial Duopoly

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  • Luciano Fanti
  • Nicola Meccheri

Abstract

type="main"> This paper deals with the issue of the Cournot–Bertrand profit differential by bringing together two different strands of the industrial organisation literature: managerial delegation and unionised oligopolies. Relative to unionisation, two alternative regimes are analysed and compared: ‘decentralised unionisation’, involving firm-specific unions, and ‘centralised unionisation’, in which an industry-wide union sets a uniform wage for the entire industry. The ‘reversal result’ – that is, profits are higher under Bertrand than under Cournot – applies irrespective of the unionisation regime and for a very wide range of product differentiation. Moreover, it is more likely to occur when unionisation is decentralised than centralised and, especially when products are not too much differentiated, the profit differential in favour of price competition is also larger in the presence of firm-specific unions. However, if firm owners not only delegate the choice of the strategic variable but also that of the competition regime, managers always opt to compete in quantities, thus generating an inefficient choice for owners.

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  • Luciano Fanti & Nicola Meccheri, 2015. "On the Cournot–Bertrand Profit Differential and the Structure of Unionisation in a Managerial Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 54(4), pages 266-287, December.
  • Handle: RePEc:bla:ausecp:v:54:y:2015:i:4:p:266-287
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    File URL: http://hdl.handle.net/10.1111/1467-8454.12054
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    Cited by:

    1. Luciano Fanti & Marcella Scrimitore, 2017. "How to compete? Cournot vs. Bertrand in a vertical structure with an integrated input supplier," Discussion Papers 2017/221, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    2. repec:bla:manchs:v:85:y:2017:i:6:p:661-681 is not listed on IDEAS
    3. Nicola Meccheri & Luciano Fanti, 2016. "Should delegation contracts be made before or after union wage setting? Endogenous moves in a managerial-unionized duopoly," Working Paper series 16-18, Rimini Centre for Economic Analysis.
    4. Luciano Fanti & Nicola Meccheri, 2016. "Endogenous timing of managerial contracts in unionised oligopolies," Working Paper series 16-19, Rimini Centre for Economic Analysis.

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