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Codetermination and product differentiation

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  • Fanti, Luciano
  • Gori, Luca
  • Sodini, Mauro

Abstract

This research revisits the theoretical literature on codetermination in differentiated Cournot duopoly markets. Although codetermination is widely adopted in some north European countries, the theoretical analysis is restricted to a few number of works. The literature is led by Kraft (1998), who shows that codetermination emerges as a market outcome (sub-optimal Nash equilibrium) in a quantity-setting duopoly with homogeneous products. However, there exists evidence that codetermination is quite absent in countries where there are no specific laws. This article shows that codetermination cannot emerge as a Nash equilibrium when products are sufficiently differentiated (even when they are complementary). These results also holds by considering R&D activities.

Suggested Citation

  • Fanti, Luciano & Gori, Luca & Sodini, Mauro, 2018. "Codetermination and product differentiation," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 390-403.
    • Handle: RePEc:eee:reveco:v:58:y:2018:i:c:p:390-403
    DOI: 10.1016/j.iref.2018.05.001
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    References listed on IDEAS

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    1. d'Aspremont, Claude & Jacquemin, Alexis, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum," American Economic Review, American Economic Association, vol. 80(3), pages 641-642, June.
    2. Felix FitzRoy & Kornelius Kraft, 2005. "Co‐determination, Efficiency and Productivity," British Journal of Industrial Relations, London School of Economics, vol. 43(2), pages 233-247, June.
    3. Naylor, Robin A., 2002. "Industry profits and competition under bilateral oligopoly," Economics Letters, Elsevier, vol. 77(2), pages 169-175, October.
    4. Kornelius Kraft & Jörg Stank & Ralf Dewenter, 2011. "Co-determination and innovation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(1), pages 145-172.
    5. Fanti, Luciano & Gori, Luca, 2012. "The codetermined firm in a Cournot duopoly: A stability analysis," Economic Modelling, Elsevier, vol. 29(4), pages 1242-1247.
    6. d'ASPREMONT, Claude & JACQUEMIN, Alexis, 1988. "Cooperative and noncooperative R&D in duopoly with spillovers," LIDAM Reprints CORE 823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Nakamura, Yasuhiko, 2015. "Endogenous choice of strategic incentives in a mixed duopoly with a new managerial delegation contract for the public firm," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 262-277.
    8. Gary Gorton & Frank A. Schmid, 2004. "Capital, Labor, and The Firm: A Study of German Codetermination," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 863-905, September.
    9. John R. Cable & Felix R. Fitzroy, 1980. "Productive Efficiency, Incentives And Employee Participation: Some Preliminary Results For West Germany," Kyklos, Wiley Blackwell, vol. 33(1), pages 100-121, February.
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    11. Kraft, Kornelius, 2001. "Codetermination as a strategic advantage?," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 543-566, March.
    12. Lopez, Monica Correa & Naylor, Robin A., 2004. "The Cournot-Bertrand profit differential: A reversal result in a differentiated duopoly with wage bargaining," European Economic Review, Elsevier, vol. 48(3), pages 681-696, June.
    13. Luis M. Granero, 2006. "Codetermination, R&D, and Employment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(2), pages 309-328, June.
    14. Luciano Fanti & Luca Gori & Mauro Sodini, 2017. "The Bargaining–sales‐delegation Game," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(6), pages 857-889, September.
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    2. Luca Gori & Luciano Fanti, 2024. "The co-determination decision game with consumption externalities," Theory and Decision, Springer, vol. 97(2), pages 219-259, September.
    3. Luca Gori & Luciano Fanti, 2022. "Endogenous codetermination," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(1), pages 272-285, January.

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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