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The codetermined firm in a Cournot duopoly: a stability analysis


  • Fanti, Luciano
  • Gori, Luca


We study the stability issue in a Cournot duopoly with codetermined firms. We show that when both firms codetermine employment together with decentralised employees’ representatives, a rise in wages acts as an economic de-stabiliser (stabiliser) when the wage is fairly low (high), while under profit maximisation a rise in wages always stabilises the market equilibrium. Moreover, increasing the union’s bargaining power has a de-stabilising effect, except when the wage is low and the firm’s power is already high.

Suggested Citation

  • Fanti, Luciano & Gori, Luca, 2011. "The codetermined firm in a Cournot duopoly: a stability analysis," MPRA Paper 34144, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:34144

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    References listed on IDEAS

    1. Den Haan, Wouter J., 2001. "The importance of the number of different agents in a heterogeneous asset-pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 25(5), pages 721-746, May.
    2. 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.
    3. Puu, T., 1998. "The chaotic duopolists revisited," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 385-394, January.
    4. Dowrick, Steve, 1990. "The relative profitability of Nash bargaining on the labour demand curve or the contract curve," Economics Letters, Elsevier, vol. 33(2), pages 121-125, June.
    5. Luciano Fanti & Nicola Meccheri, 2011. "The Cournot-Bertrand profit differential in a differentiated duopoly with unions and labour decreasing returns," Economics Bulletin, AccessEcon, vol. 31(1), pages 233-244.
    6. Bughin, J., 1995. "Unions and strategic managerial incentives," Economics Letters, Elsevier, vol. 47(1), pages 95-100, January.
    7. Bischi, Gian Italo & Kopel, Michael, 2001. "Equilibrium selection in a nonlinear duopoly game with adaptive expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 46(1), pages 73-100, September.
    8. Fanti, Luciano & Gori, Luca, 2012. "The dynamics of a differentiated duopoly with quantity competition," Economic Modelling, Elsevier, vol. 29(2), pages 421-427.
    9. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-122, February.
    10. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-1142, December.
    11. Kraft, Kornelius, 1998. "The codetermined firm in oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 195-201, November.
    12. Tramontana, Fabio, 2010. "Heterogeneous duopoly with isoelastic demand function," Economic Modelling, Elsevier, vol. 27(1), pages 350-357, January.
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    Cited by:

    1. Fanti, Luciano, 2014. "The dynamics of a banking duopoly with capital regulations," Economic Modelling, Elsevier, vol. 37(C), pages 340-349.
    2. Du, Jian-guo & Fan, Yue-qian & Sheng, Zhao-han & Hou, Yun-zhang, 2013. "Dynamics analysis and chaos control of a duopoly game with heterogeneous players and output limiter," Economic Modelling, Elsevier, vol. 33(C), pages 507-516.

    More about this item


    Bifurcation; Codetermination; Cournot; Duopoly; Employment;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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