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Cross-ownership and unions in a Cournot duopoly: when profits reduce with horizontal product differentiation

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  • Luciano Fanti

Abstract

Motivated by the widespread presence both of decentralised unions and cross-participation at ownership level (for instance in Japan and US), this paper aims at investigating whether the conventional wisdom that a reduction in the degree of product differentiation (which increases competition) always reduces firms' profits, remains true in a differentiated duopoly extended with both equity participation of one firm in another firm and risk-neutral (or risk-averse) decentralised monopoly unions. We show that such a common wisdom, while it holds when either unions or crossownership separately exist, is reversed for a fairly low degree of product differentiation and large percentage of cross-ownership when both unions and crossownership are in existence: this is because the interaction between the reduced employment due to cross-ownership and the moderation of wage claims due to the menaces for employment, both magnified by increasing product market competition, works to increase profits more than how the latter are reduced by a higher competition.

Suggested Citation

  • Luciano Fanti, 2011. "Cross-ownership and unions in a Cournot duopoly: when profits reduce with horizontal product differentiation," Discussion Papers 2011/128, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  • Handle: RePEc:pie:dsedps:2011/128
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2011-128.pdf
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    Cited by:

    1. Juan Carlos Bárcena‐Ruiz & Amagoia Sagasta, 2021. "Cross‐ownership and corporate social responsibility," Manchester School, University of Manchester, vol. 89(4), pages 367-384, July.
    2. 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.
    3. Luciano Fanti & Domenico Buccella, 2021. "Strategic trade policy with interlocking cross-ownership," Journal of Economics, Springer, vol. 134(2), pages 147-174, October.
    4. Domenico Buccella, 2015. "Unionized duopoly, market competition with differentiated products, and welfare," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(4), pages 455-473, December.
    5. Domenico Buccella & Leonard F. S. Wang, 2021. "Union negotiations, product market cooperation, and profits," Metroeconomica, Wiley Blackwell, vol. 72(1), pages 82-100, February.
    6. Tatsuhiko Nariu & David Flath & Makoto Okamura, 2021. "A vertical oligopoly in which entry increases every firm's profit," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(3), pages 684-694, August.
    7. Dong, Quan & Chang, Yang-Ming, 2020. "Emission taxes vs. environmental standards under partial ownership arrangements," Research in Economics, Elsevier, vol. 74(3), pages 250-262.
    8. Fanti, Luciano, 2016. "Social welfare and cross-ownership in a vertical industry: When the mode of competition matters for antitrust policy," Japan and the World Economy, Elsevier, vol. 37, pages 8-16.
    9. Fanti, Luciano & Buccella, Domenico, 2016. "Passive unilateral cross-ownership and strategic trade policy," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 10, pages 1-22.
    10. Buccella Domenico, 2019. "A Simple Model for the Integration of Goods and the Capital Market with Unionized Labor Markets," Ekonomika (Economics), Sciendo, vol. 98(1), pages 19-37, June.

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    More about this item

    Keywords

    Cross-ownership; Duopoly; Unions.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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