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The Effects of Entry in Oligopoly with Bargained Wages

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  • Naylor, Robin
  • Soegaard, Christian

Abstract

We show that a firm’s profits under Cournot oligopoly can be increasing in the number of firms in the industry if wages are determined by decentralised bargaining in unionised bilateral oligopoly. The intuition for the result is that increased product market competition following an increase in the number of firms is mirrored by increased labour market rivalry which induces (profit-enhancing) wage moderation. Whether the product or labour market effect dominates depends both on the extent of union bargaining power and on the nature of union preferences. An incumbent monopolist will have an incentive to accommodate entry if the labour market effect dominates. We also show that this incentive is stronger if the incumbent anticipates that, post entry, it will be able to act as a Stackelberg leader.

Suggested Citation

  • Naylor, Robin & Soegaard, Christian, 2014. "The Effects of Entry in Oligopoly with Bargained Wages," Economic Research Papers 270239, University of Warwick - Department of Economics.
  • Handle: RePEc:ags:uwarer:270239
    DOI: 10.22004/ag.econ.270239
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    References listed on IDEAS

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    Cited by:

    1. Marco de Pinto & Laszlo Goerke, 2020. "Welfare‐enhancing Trade Unions in an Oligopoly with Excessive Entry," Manchester School, University of Manchester, vol. 88(1), pages 60-90, January.
    2. Naylor, Robin & Soegaard, Christian, 2018. "The Effects of Entry in Oligopolistic Trade with Bargained Input Prices," Economic Research Papers 269084, University of Warwick - Department of Economics.
    3. Luciano Fanti, 2016. "Interlocking cross-ownership in a unionised duopoly: when social welfare benefits from “more collusion”," Journal of Economics, Springer, vol. 119(1), pages 47-63, September.

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    More about this item

    Keywords

    Financial Economics;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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