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Bargaining Agenda and Entry in a Unionised Model with Network Effects

Author

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  • Luciano Fanti

    (University of Pisa)

  • Domenico Buccella

    (Kozminski University)

Abstract

This paper investigates the bargaining agenda selection in a unionised duopoly with network effects. In contrast to the established result, in which under a pure monopoly the firm always prefers right-to-manage (RTM), it is shown that a sequential efficient bargaining (SEB) is preferred, provided that the network effect is sufficiently intense. Moreover, the monopolist may strategically commit either to the simultaneous efficient bargaining (EB), RTM or SEB to deter market entry, depending on the size of the fixed costs and the network intensity. The strengthening of the network effects has the following implications. First, the blocking agenda switches from EB/SEB (for low-/high-fixed costs of entry) to RTM. Second, high network intensity eliminates the possibility of using the negotiation agenda as a tool to create a barrier to entry. The duopoly under SEB always yields the most desirable social welfare level. However, the threatened monopoly may impede the achievement of the social first-best outcome due to the entry deterrence effect of the bargaining agenda’s strategic choice. The role of the network effect on welfare is various: high network intensity makes the desirable social outcome attainable. However, medium intensity of the network effect may lead to the least desirable welfare level.

Suggested Citation

  • Luciano Fanti & Domenico Buccella, 2016. "Bargaining Agenda and Entry in a Unionised Model with Network Effects," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 2(1), pages 91-121, March.
    • Handle: RePEc:spr:italej:v:2:y:2016:i:1:d:10.1007_s40797-015-0026-3
    DOI: 10.1007/s40797-015-0026-3
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Luciano Fanti & Domenico Buccella, 2017. "Bargaining agenda in a unionised monopoly with network effects: when corporate social responsibility may be welfare-reducing," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 34(3), pages 471-489, December.
    2. Luciano Fanti & Domenico Buccella, 2019. "When unionisation is profitable for firms in network industries," Metroeconomica, Wiley Blackwell, vol. 70(4), pages 711-722, November.
    3. Luciano Fanti & Domenico Buccella, 2016. "Network externalities and corporate social responsibility," Economics Bulletin, AccessEcon, vol. 36(4), pages 2043-2050.
    4. Buccella Domenico & Fanti Luciano & Gori Luca, 2024. "Product Quality and Product Compatibility in Network Industries," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(1), pages 299-339, January.
    5. Luciano Fanti & Domenico Buccella, 2017. "Profit raising entry effects in network industries with Corporate Social Responsibility," Economics and Business Letters, Oviedo University Press, vol. 6(3), pages 59-68.
    6. Luciano Fanti & Domenico Buccella, 2021. "Pollution, green union, and network industry," Estudios de Economia, University of Chile, Department of Economics, vol. 48(2 Year 20), pages 139-173, December.
    7. Domenico Buccella & Luciano Fanti & Luca Gori, 2023. "Strategic product compatibility in network industries," Journal of Economics, Springer, vol. 140(2), pages 141-168, October.
    8. Domenico Buccella & Luciano Fanti, 2017. "A game-theoretic approach to the choice of union-oligopoly baargaining agenda," Discussion Papers 2017/214, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    9. Kopel, Michael & Petrakis, Emmanuel & Ressi, Anna, 2019. "Endogenous scope of firm-union bargaining with vertical pay comparisons," Journal of Economic Behavior & Organization, Elsevier, vol. 167(C), pages 39-52.
    10. Luciano Fanti & Domenico Buccella, 2018. "Profitability of corporate social responsibility in network industries," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 65(3), pages 271-289, September.
    11. Fanti Luciano & Buccella Domenico, 2016. "Privatisation or State Ownership When Labour Market is Unionised?," Folia Oeconomica Stetinensia, Sciendo, vol. 16(1), pages 21-36, December.
    12. Buccella, Domenico & Fanti, Luciano, 2020. "Do labour union recognition and bargaining deter entry in a network industry? A sequential game model," Utilities Policy, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Efficient bargaining; Right-to-manage; Firm-union bargaining agenda; Network effects;
    All these keywords.

    JEL classification:

    • 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
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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