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Union-Oligopoly Bargaining and Entry Deterrence:A Reassessment of Limit Pricing

Listed author(s):
  • Rupayan Pal

    ()

  • Bibhas Saha

    ()

This paper introduces wage bargaining in the framework of Milgrom and Roberts where the workers' reservation wage is the relevant information parameter critical for entry. The authors show that entry threat signi cantly distorts the wage, which in turn adversely a ects the rm's ability to signal through price. Consequently, the separating equilibrium (in price) does not always exist. Instead, the authors get a semi-separating equilibrium. Pooling equilibrium may not also exist. If, however, wage agreements can be made public, signalling occurs with or without distortions in the full information wages. Pooling equilibrium in wage also exists. The paper also examines whether wage or price is the preferred signalling device, and whether wage agreements should be made public or not. [WP no. 14].

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Paper provided by eSocialSciences in its series Working Papers with number id:1375.

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Date of creation: Feb 2008
Handle: RePEc:ess:wpaper:id:1375
Note: Institutional Papers
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  1. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect of Collective Bargaining Legislation on Strikes and Wages," Papers of Peter Cramton 99res, University of Maryland, Department of Economics - Peter Cramton, revised 30 Jul 1998.
  2. Vannetelbosch, V. J., "undated". "Wage bargaining with incomplete information in an unionized Cournot oligopoly," CORE Discussion Papers RP 1303, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
  4. Kyle Bagwell & Garey Ramey, 1987. "Advertising and Limit Pricing," Discussion Papers 729, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
  6. A. Jorge Padilla & Samuel Bentolila & Juan J. Dolado, 1996. "Wage Bargaining in Industries with Market Power," Working Papers 9616, Banco de España;Working Papers Homepage.
  7. Lindsey, Robin & West, Douglas S., 2003. "Predatory pricing in differentiated products retail markets," International Journal of Industrial Organization, Elsevier, vol. 21(4), pages 551-592, April.
  8. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
  9. Timothy Besley & Robin Burgess, 2002. "Can Labour Regulation Hinder Economic Performance? Evidence from India," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 33, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  10. Rupayan Pal & Bibhas Saha, 2006. "Wage Commitment, Signalling, and Entry Deterrence or Accommodation," LABOUR, CEIS, vol. 20(4), pages 625-650, December.
  11. Aronsson, Thomas & Lofgren, Karl-Gustaf & Wikstrom, Magnus, 1993. "Monopoly union versus efficient bargaining : Wage and employment determination in the Swedish construction sector," European Journal of Political Economy, Elsevier, vol. 9(3), pages 357-370, August.
  12. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  13. Laurent Linnemer, 1998. "Entry Deterrence, Product Quality: Price and Advertising as Signals," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(4), pages 615-645, December.
  14. Christian Schultz, 1997. "Limit Pricing when Incumbents have Conflicting Interests," CIE Discussion Papers 1997-17, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  15. Joerg Lingens, 2007. "Timing is Everything - The Labour Market Effects of Union Wage Bargaining," Economics Bulletin, AccessEcon, vol. 10(5), pages 1-11.
  16. Church, Jeffrey & Ware, Roger, 1996. "Delegation, market share and the limit price in sequential entry models," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 575-609, July.
  17. Mathias Dewatripont, 1988. "Commitment through Renegotiation-Proof Contracts with Third Parties," ULB Institutional Repository 2013/175990, ULB -- Universite Libre de Bruxelles.
  18. Dewatripont, Mathias, 1987. "Entry deterrence under trade unions," European Economic Review, Elsevier, vol. 31(1-2), pages 149-156.
  19. Albaek, Svend & Overgaard, Per Baltzer, 1994. "Advertising and pricing to deter or accommodate entry when demand is unknown: Comment," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 83-87, March.
  20. Ohnishi, Kazuhiro, 2001. "Lifetime Employment Contract and Strategic Entry Deterrence: Cournot and Bertrand," Australian Economic Papers, Wiley Blackwell, vol. 40(1), pages 30-43, March.
  21. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-1142, December.
  22. Kim Jeong-Yoo, 2003. "Signal Jamming in Games with Multiple Senders," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 3(1), pages 1-20, November.
  23. Bagwell, Kyle & Ramey, Garey, 1990. "Advertising and pricing to deter or accommodate entry when demand is unknown," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 93-113.
  24. Shingo Ishiguro & Yoshimasa Shirai, 1998. "Entry Deterrence in a Unionized Oligopoly," The Japanese Economic Review, Japanese Economic Association, vol. 49(2), pages 210-221, 06.
  25. repec:ebl:ecbull:v:10:y:2007:i:5:p:1-11 is not listed on IDEAS
  26. Clask, A. & Oswald, A., 1992. "Trade Union Utility Functions: A survey of Union Leaders' Views," Economics Series Working Papers 99132, University of Oxford, Department of Economics.
  27. Bughin, Jacques, 1999. "The strategic choice of union-oligopoly bargaining agenda," International Journal of Industrial Organization, Elsevier, vol. 17(7), pages 1029-1040, October.
  28. Kraft, Kornelius, 1998. "The codetermined firm in oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 195-201, November.
  29. Sudipa Majumdar & Bibhas Saha, 1998. "Job security, wage bargaining and duopoly outcomes," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(4), pages 389-403.
  30. Martin, Stephen, 1995. "Oligopoly limit pricing: Strategic substitutes, strategic complements," International Journal of Industrial Organization, Elsevier, vol. 13(1), pages 41-65, March.
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