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Efficient bargaining versus right to manage: A stability analysis in a Cournot duopoly with trade unions

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  • Fanti, Luciano
  • Gori, Luca

Abstract

The present study considers a unionised (nonlinear) duopoly with two different labour market institutions, i.e. efficient bargaining (EB) and right to manage (RTM), to analyse product market stability under quantity competition with trade unions. We show that when the preference of unions towards wages is small, (i) the parametric stability region under RTM is higher than under EB, and (ii) a rise in the union power in the Nash bargaining played between firms and unions monotonically increases (resp. reduces) the parametric stability region under RTM (resp. EB). In contrast, when the preference of unions becomes larger, an increase in the union's bargaining power acts: (1) as an economic stabiliser when the union power is small; (2) as an economic de-stabiliser when the union power is high. In addition to established results with regard to equilibrium outcomes, our findings shed some light on the effects of how the labour market regulation affects out-of-equilibrium behaviours in a Cournot duopoly.

Suggested Citation

  • Fanti, Luciano & Gori, Luca, 2013. "Efficient bargaining versus right to manage: A stability analysis in a Cournot duopoly with trade unions," Economic Modelling, Elsevier, vol. 30(C), pages 205-211.
  • Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:205-211
    DOI: 10.1016/j.econmod.2012.09.010
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    Cited by:

    1. Capuano, Stella & Hauptmann, Andreas & Schmerer, Hans-Jörg, 2020. "Trade and unions: Does size matter?," Economic Modelling, Elsevier, vol. 84(C), pages 66-75.
    2. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2020. "Wage Bargaining and Employment Revisited: Separability and Efficiency in Collective Bargaining," CESifo Working Paper Series 8422, CESifo.
    3. Matsui, Muneya & Yoshimi, Taiyo, 2015. "Macroeconomic dynamics in a model with heterogeneous wage contracts," Economic Modelling, Elsevier, vol. 49(C), pages 72-80.
    4. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2019. "The Decomposability of the Nash Bargaining Solution in Labor Markets," Working Papers CIE 128, Paderborn University, CIE Center for International Economics.
    5. Radhicka Kapoor & P. P. Krishnapriya, 2019. "Explaining the contractualisation of India’s workforce," Working Papers id:12998, eSocialSciences.

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    More about this item

    Keywords

    Bifurcation; Cournot; Duopoly; Efficient bargaining; Right to manage;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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