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Labour decreasing returns, industry-wide union and Cournot-Bertrand profit ranking. A note

Author

Listed:
  • Luciano Fanti

    () (University of Pisa)

  • Nicola Meccheri

    () (University of Pisa)

Abstract

While the received literature on unionized duopolies emphasized the key role of inter-union competition in reversing the standard Cournot-Bertrand profit ranking, in this paper such issue is studied in a framework with labour decreasing returns and a centralized (industry-wide) union, hence in a context where inter-union competition is clearly absent. Nevertheless, it is shown that the "reversal result" can apply provided that union is sufficiently wage oriented. Furthermore, it is pointed out that, in the special case of total wage bill maximization, it applies for a larger range of the degree of product substitutability under a central union rather than under firm-specific unions.

Suggested Citation

  • Luciano Fanti & Nicola Meccheri, 2012. "Labour decreasing returns, industry-wide union and Cournot-Bertrand profit ranking. A note," Economics Bulletin, AccessEcon, vol. 32(1), pages 894-904.
  • Handle: RePEc:ebl:ecbull:eb-11-00841
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    File URL: http://www.accessecon.com/Pubs/EB/2012/Volume32/EB-12-V32-I1-P84.pdf
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    References listed on IDEAS

    as
    1. Henrick Horn & Asher Wolinsky, 1988. "Bilateral Monopolies and Incentives for Merger," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
    2. Luciano Fanti & Luca Gori, 2011. "A Note on Trade Unions, Unemployment Insurance, and Endogenous Growth," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 37(2), pages 270-280.
    3. 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.
    4. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    5. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398.
    6. Luciano Fanti & Nicola Meccheri, 2011. "The Cournot-Bertrand profit differential in a differentiated duopoly with unions and labour decreasing returns," Economics Bulletin, AccessEcon, vol. 31(1), pages 233-244.
    7. Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-344, April.
    8. Vives, Xavier, 1985. "On the efficiency of Bertrand and Cournot equilibria with product differentation," Journal of Economic Theory, Elsevier, vol. 36(1), pages 166-175, June.
    9. 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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    Citations

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    Cited by:

    1. Luciano Fanti & Nicola Meccheri, 2016. "Non-Rigid Wages And Merger Profitability Reversal Under Convex Costs And Centralized Unionization," Bulletin of Economic Research, Wiley Blackwell, vol. 68(4), pages 383-395, October.
    2. Fanti, Luciano & Meccheri, Nicola, 2014. "Profits and competition under alternative technologies in a unionized duopoly with product differentiation," Research in Economics, Elsevier, vol. 68(2), pages 157-168.

    More about this item

    Keywords

    unionized duopolies; industry-wide union; labour decreasing returns;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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