Wage bargaining and quality competition
In a standard model of vertical differentiation, wage is assumed to determine the quality. Wage is also subject to bargaining. Increased bargaining power of the worker in the low quality firm reduces quality differential, and increases price competitiveness. The Opposite happens from a similar change in the high quality firm.
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- Gabszewicz, J. & Turrini, A., 2000.
"Workers' skills, product quality and industry equilibrium,"
International Journal of Industrial Organization,
Elsevier, vol. 18(4), pages 575-593, May.
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- GABSZEWICZ, Jean J. & THISSE, Jacques-François, "undated". "Price competition, quality and income disparities," CORE Discussion Papers RP 370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-1142, December.
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