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Endogenous Contracts in Unionized Oligopoly

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  • Dusanee Kesavayuth
  • Vasileios Zikos

Abstract

We study the endogenous determination of contracts in a unionized oligopoly and the welfare implications thereof. Alternative contracts specify the sequencing in the selection of R&D and wages. They can be classified as ‘fixed’ when the unions set wages before the firms make their R&D decisions or ‘floating’ when the sequencing of these choices is reversed. If the unions are highly employment‐oriented, we find that either all firm–union pairs choose floating‐wage contracts or both contract types may coexist depending on the degree of technological spillovers. However, when the unions have stronger preference over attaining a good wage deal, then it becomes very likely that fixed‐wage contracts will endogenously emerge because they can serve as an insurance device against oppor tunistic wage increases. Our welfare analysis suggests that welfare‐improving contracts may nevertheless not always arise in equilibrium.

Suggested Citation

  • Dusanee Kesavayuth & Vasileios Zikos, 2009. "Endogenous Contracts in Unionized Oligopoly," LABOUR, CEIS, vol. 23(2), pages 209-235, June.
  • Handle: RePEc:bla:labour:v:23:y:2009:i:2:p:209-235
    DOI: 10.1111/j.1467-9914.2009.00453.x
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Takauchi, Kazuhiro & Mizuno, Tomomichi, 2019. "Solving a hold-up problem may harm all firms: Downstream R&D and transport-price contracts," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 29-49.
    3. Takauchi, Kazuhiro, 2016. "Profit-reducing fixed-price contract: The role of the transport sector," MPRA Paper 71413, University Library of Munich, Germany.

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