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Is Price Competition More Efficient than Quantity Competition? A Reversal with Unionized Oligopolists

Author

Listed:
  • Minas Vlassis

    (University of Crete)

  • Stefanos Mamakis

    (University of Crete)

Abstract

In the context of union-duopoly decentralized bargaining, we argue that, prior to the realization of any employment and production plans, firms and unions may collectively decide about their bargaining agenda. That is, whether they will subsequently negotiate about only wages (“Right-to-Manage”) or about both wages and employment (“Efficient Bargains”). We show that under price competition in the product market the equilibrium bargaining agendas always involve only wages. Under quantity competition, however, and provided that the union bargaining power is low enough, one firm/union pair agrees on Efficient Bargains while the other pair agrees on Right-to-Manage. Thus, if sufficient product differentiation among firms exists, then social welfare can be higher under quantity competition than under price competition; the role of unions is critical for this result.

Suggested Citation

  • Minas Vlassis & Stefanos Mamakis, 2016. "Is Price Competition More Efficient than Quantity Competition? A Reversal with Unionized Oligopolists," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(1), pages 103-126, August.
    • Handle: RePEc:kap:revind:v:49:y:2016:i:1:d:10.1007_s11151-016-9502-7
    DOI: 10.1007/s11151-016-9502-7
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    References listed on IDEAS

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    More about this item

    Keywords

    Bargaining agenda; Oligopoly; Mode of competition;
    All these keywords.

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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