The codetermined firm in a Cournot duopoly: a stability analysis
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.
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