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Optimal contracts for vertically connected, unionized duopolies

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  • Grandner, Thomas

Abstract

In this paper a vertically structured duopolistic market with unionized price setting firms is analyzed. The form of the contract of the transactions between upstream and downstream firms can be linear pricing, franchising or vertical integration. It is known from literature (Irmen 1997) that the price elasticity of the industry demand and the degree of product differentiation are the decisive factors in the determination of the profit maximizing form of the contract. In this paper it is shown that the bargaining power of the union is an additional factor. With a higher bargaining power linear pricing becomes less preferable. (author's abstract)

Suggested Citation

  • Grandner, Thomas, 2000. "Optimal contracts for vertically connected, unionized duopolies," Department of Economics Working Paper Series 1588, WU Vienna University of Economics and Business.
  • Handle: RePEc:wiw:wus005:1588
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. 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.
    3. Lin, Y Joseph, 1988. "Oligopoly and Vertical Integration: Note," American Economic Review, American Economic Association, vol. 78(1), pages 251-254, March.
    4. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, March.
    5. Vannetelbosch, Vincent J., 1997. "Wage bargaining with incomplete information in an unionized Cournot oligopoly," European Journal of Political Economy, Elsevier, vol. 13(2), pages 353-374, May.
    6. Dobson, Paul W., 1994. "Multifirm unions and the incentive to adopt pattern bargaining in oligopoly," European Economic Review, Elsevier, vol. 38(1), pages 87-100, January.
    7. Santoni, Michele, 1996. "Union-Oligopoly Sequential Bargaining: Trade and Industrial Policies," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 640-663, October.
    8. Irmen, Andreas, 1997. "Note on duopolistic vertical restraints," European Economic Review, Elsevier, vol. 41(8), pages 1559-1567, August.
    9. Corneo, Giacomo, 1995. "National wage bargaining in an internationally integrated product market," European Journal of Political Economy, Elsevier, vol. 11(3), pages 503-520, September.
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    Cited by:

    1. Gerlinde Fellner & Matthias Sutter, 2009. "Causes, Consequences, and Cures of Myopic Loss Aversion - An Experimental Investigation," Economic Journal, Royal Economic Society, vol. 119(537), pages 900-916, April.
    2. Hagemann, Harald, 2010. "L. Albert Hahn's Economic Theory of Bank Credit," Department of Economics Working Paper Series 2948, WU Vienna University of Economics and Business.
    3. Engelbert Stockhammer & Paul Ramskogler, 2009. "Post-Keynesian economics How to move forward," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 6(2), pages 227-246.
    4. Theresa Grafeneder-Weissteiner, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Papers wuwp132, Vienna University of Economics and Business, Department of Economics.
    5. Grafeneder-Weissteiner, Theresa & Prettner, Klaus, 2010. "Agglomeration processes in aging societies," Department of Economics Working Paper Series 1620, WU Vienna University of Economics and Business.
    6. Riedl, Aleksandra & Rocha-Akis, Silvia, 2007. "Testing the tax competition theory: How elastic are national tax bases in western Europe?," Department of Economics Working Paper Series 860, WU Vienna University of Economics and Business.
    7. Engelbert Stockhammer & Lucas Grafl, 2010. "Financial Uncertainty and Business Investment," Review of Political Economy, Taylor & Francis Journals, vol. 22(4), pages 551-568.
    8. Paul Ramskogler, 2007. "Uncertainty, market power and credit rationing," Department of Economics Working Papers wuwp105, Vienna University of Economics and Business, Department of Economics.
    9. Annemarie Steidl & Engelbert Stockhammer, 2007. "Coming and leaving. Internal mobility in late Imperial Austria," Department of Economics Working Papers wuwp107, Vienna University of Economics and Business, Department of Economics.
    10. Eckhard Hein, 2010. "Shareholder Value Orientation, Distribution And Growth-Short- And Medium-Run Effects In A Kaleckian Model," Metroeconomica, Wiley Blackwell, vol. 61(2), pages 302-332, May.
    11. Theresa Grafeneder-Weissteiner & Klaus Prettner, 2009. "Agglomeration and population aging in a two region model of exogenous growth," Department of Economics Working Papers wuwp125, Vienna University of Economics and Business, Department of Economics.
    12. Engelbert Stockhammer & Paul Ramskogler, 2008. "Uncertainty and Exploitation in History," Journal of Economic Issues, Taylor & Francis Journals, vol. 42(1), pages 175-194, March.
    13. Silvia Rocha-Akis, 2006. "Labour tax policies and strategic offshoring under unionised oligopoly," Department of Economics Working Papers wuwp099, Vienna University of Economics and Business, Department of Economics.
    14. Harald Badinger & Ingrid Kubin, 2007. "Vom kurzfristigen zum mittelfristigen Gleichgewicht in einer offenen Volkswirtschaft unter fixen und flexiblen Wechselkursen," Department of Economics Working Papers wuwp101, Vienna University of Economics and Business, Department of Economics.
    15. Grafeneder-Weissteiner, Theresa, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Paper Series 902, WU Vienna University of Economics and Business.
    16. Pasquale Commendatore & Ingrid Kubin & Carmelo Petraglia, 2009. "Footloose Capital and Productive Public Services," Chapters,in: Geography, Structural Change and Economic Development, chapter 1 Edward Elgar Publishing.
    17. Grandner, Thomas, 2007. "Product differentiation in a linear city and wage bargaining," Department of Economics Working Paper Series 1158, WU Vienna University of Economics and Business.
    18. Özlem Onaran, 2007. "International financial markets and fragility in the Eastern Europe: "can it happen" here?," Department of Economics Working Papers wuwp108, Vienna University of Economics and Business, Department of Economics.
    19. Currie, Martin & Kubin, Ingrid, 2005. "Fixed price dynamics versus flexible price dynamics," Department of Economics Working Paper Series 114, WU Vienna University of Economics and Business.
    20. Smet, Koen, 2007. "Stuck in the middle? The structure of trade between South Africa and its major trading partners," Department of Economics Working Paper Series 876, WU Vienna University of Economics and Business.
    21. Figerl, Jürgen & Grandner, Thomas, 2008. "Job quality and wages in duopsony," Department of Economics Working Paper Series 1304, WU Vienna University of Economics and Business.

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    Keywords

    vertical integration; trade unions;

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