Managerial Delegation Schemes in a Duopoly with Endogenous Production Costs: A Comparison of Sales and Relative Profit Delegation under Centralised Unionisation
In this paper we study how managerial delegation schemes in a duopoly product market interact with wage decisions taken by a monopoly central (industry-wide) union in the labour market. We analyse a model where, at the first stage, firms' owners optimally choose for their managers a delegation contract that can be “sales delegation” or “relative profit delegation”; at the second stage, the union fixes the wage for all (non-managerial) workers in the industry; and finally, at the third stage, managers compete in the product market. Interestingly, our results prove to be more varied with respect to findings by the managerial delegation literature with exogenous production costs for firms. Most notably, it is pointed out that, in equilibrium, both firm profitability and welfare outcomes can be superior under both sales delegation and relative profit delegation, depending on various factors such as the degree of product differentiation and the competition regime.
|Date of creation:||Jun 2012|
|Contact details of provider:|| Postal: Via Patara, 3, 47921 Rimini (RN)|
Web page: http://www.rcfea.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mezzetti, Claudio & Dinopoulos, Elias, 1991.
"Domestic unionization and import competition,"
Journal of International Economics,
Elsevier, vol. 31(1-2), pages 79-100, August.
- Nolan Miller & Amit Pazgal, 2002. "Relative performance as a strategic commitment mechanism," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 51-68.
- Mónica Correa-López, 2007. "Price and Quantity Competition in a Differentiated Duopoly with Upstream Suppliers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 469-505, 06.
- Chaim Fershtman & Kenneth L Judd, 1984.
"Equilibrium Incentives in Oligopoly,"
642, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Lommerud, Kjell Erik & Straume, Odd Rune & Sorgard, Lars, 2005. "Downstream merger with upstream market power," European Economic Review, Elsevier, vol. 49(3), pages 717-743, April.
- Jason R. Barro & Robert J. Barro, 1990.
"Pay, Performance, and Turnover of Bank CEOs,"
NBER Working Papers
3262, National Bureau of Economic Research, Inc.
- Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988.
" Compensation and Incentives: Practice vs. Theory,"
Journal of Finance,
American Finance Association, vol. 43(3), pages 593-616, July.
- Szymanski, Stefan, 1994. "Strategic delegation with endogenous costs : A duopoly with wage bargaining," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 105-116, March.
- Henrick Horn & Asher Wolinsky, 1988.
"Bilateral Monopolies and Incentives for Merger,"
RAND Journal of Economics,
The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
- William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
- Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-344, April.
- Luciano Fanti & Nicola Meccheri, 2012.
"Managerial Delegation under Alternative Unionization Structures,"
Working Paper Series
07_12, The Rimini Centre for Economic Analysis.
- Luciano Fanti & Nicola Meccheri, 2013. "Managerial Delegation under Alternative Unionization Structures," LABOUR, CEIS, vol. 27(1), pages 38-57, 03.
- Nicola Meccheri & Luciano Fanti, 2012. "Managerial delegation under alternative unionization structures," Discussion Papers 2012/138, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
- Naylor, Robin, 1997.
"Union Wage Strategies and International Trade,"
The Warwick Economics Research Paper Series (TWERPS)
480, University of Warwick, Department of Economics.
- Thijs Jansen & Arie van Lier & Arjen van Witteloostuijn, 2009. "On the impact of managerial bonus systems on firm profit and market competition: the cases of pure profit, sales, market share and relative profits compared," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 141-153.
- Symeonidis, George, 2009.
"Downstream merger and welfare in a bilateral oligopoly,"
Economics Discussion Papers
3682, University of Essex, Department of Economics.
- Symeonidis, George, 2010. "Downstream merger and welfare in a bilateral oligopoly," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 230-243, May.
- Bughin, J., 1995. "Unions and strategic managerial incentives," Economics Letters, Elsevier, vol. 47(1), pages 95-100, January.
- repec:sae:ilrrev:v:43:y:1990:i:3:p:30-51 is not listed on IDEAS
- MAULEON, Ana & VANNETELBOSCH, Vincent J., "undated".
"Strategic union delegaion and inventives for merger,"
CORE Discussion Papers RP
1829, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Ana Mauleon & Vincent Vannetelbosch, 2006. "Strategic union delegation and incentives for merger," Applied Economics Letters, Taylor & Francis Journals, vol. 13(1), pages 1-5.
- Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
- Fershtman, Chaim, 1985. "Managerial incentives as a strategic variable in duopolistic environment," International Journal of Industrial Organization, Elsevier, vol. 3(2), pages 245-253, June.
- Jensen, Michael C & Murphy, Kevin J, 1990.
"Performance Pay and Top-Management Incentives,"
Journal of Political Economy,
University of Chicago Press, vol. 98(2), pages 225-264, April.
- Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
- Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2009.
"Endogenous Managerial Incentive Contracts in a Differentiated Duopoly, With and Without Commitment,"
0905, University of Crete, Department of Economics.
- Constantine Manasakis & Evangelos Mitrokostas & Emmanuel Petrakis, 2010. "Endogenous managerial incentive contracts in a differentiated duopoly, with and without commitment," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(8), pages 531-543, December.
- Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
- Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-497, June.
- Jansen, Thijs & van Lier, Arie & van Witteloostuijn, Arjen, 2007. "A note on strategic delegation: The market share case," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 531-539, June.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- Miller, Nolan H & Pazgal, Amit I, 2001. "The Equivalence of Price and Quantity Competition with Delegation," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 284-301, Summer.
- Belman, Dale L, 1988. "Concentration, Unionism, and Labor Earnings: A Sample Selection Approach," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 391-397, August.
- Arjen van Witteloostuijn & Thijs Jansen & Arie van Lier, 2007. "Bargaining over managerial contracts in delegation games: managerial power, contract disclosure and cartel behavior," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(8), pages 897-904.
- Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 197-225.
- Fumas, Vicente Salas, 1992. "Relative performance evaluation of management : The effects on industrial competition and risk sharing," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 473-489, September.
- Petrakis, Emmanuel & Vlassis, Minas, 2000. "Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment?," Labour Economics, Elsevier, vol. 7(3), pages 261-281, May.
- Pei‐Cheng Liao, 2010. "Strategic Delegation Under Unionised Duopoly: Who Will Bargain With Unions?," Australian Economic Papers, Wiley Blackwell, vol. 49(4), pages 276-288, December.
- Kurt R. Brekke, 2004. "Competition or Coordination in Hospital Markets with Unionised Labour," International Journal of Health Economics and Management, Springer, vol. 4(1), pages 65-89, 03.
- Ishita Chatterjee & Bibhas Saha, 2011. "Bilateral Delegation, Wage Bargaining and Managerial Incentives: Implications for Efficiency and Distribution," University of East Anglia Applied and Financial Economics Working Paper Series 028, School of Economics, University of East Anglia, Norwich, UK..
- Daniel F. Spulber, 1989. "Regulation and Markets," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262192756.
When requesting a correction, please mention this item's handle: RePEc:rim:rimwps:44_12. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marco Savioli)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.