Equilibrium Mode of Competition in Unionized Oligopolies: Do Unions Act as Commitment Devices to Cournot Outcomes?
In contrast with previous studies, we postulate that there is no ex-ante commitment over the type of contract (i.e., price or quantity) which a firm offers consumers. In the context of a unionized symmetric duopoly we instead argue that the mode of competition which in equilibrium emerges is the one that entails the most beneficial outcome for both the firm and its labour union, in each firm/union pair, given the choice of the rival pair. Our findings suggest that monopoly unions with risk-averse/neutral members may effectively act as commitment devices driving firms to the symmetric Cournot mode of competition.
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- Leonard Cheng, 1985. "Comparing Bertrand and Cournot Equilibria: A Geometric Approach," RAND Journal of Economics, The RAND Corporation, vol. 16(1), pages 146-152, Spring.
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- Dastidar, Krishnendu Ghosh, 1997. "Comparing Cournot and Bertrand in a Homogeneous Product Market," Journal of Economic Theory, Elsevier, vol. 75(1), pages 205-212, July.
- 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.
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