Fanti, Luciano and Gori, Luca (2011): Efficient bargaining versus right to manage: a stability analysis with heterogeneous players in a duopoly with quantity competition and trade unions.
Download (194kB) | Preview
The present study considers a unionised duopoly with the two most popular labour market institutions, i.e. efficient bargaining (EB) and right to manage (RTM) unions and analyses product market stability under quantity competition. By focusing on the role played by labour market institutions on the market dynamics, we show that when the preference of unions towards wages is fairly low, (i) the stability region under RTM is higher than under EB, and (ii) a rise in the union power in the Nash bargaining monotonically increases (reduces) the parametric stability region under RTM (EB). In contrast, when the preference of unions towards wages becomes higher, an increase in the union’s bargaining power acts: (1) as an economic stabiliser when the union power is still low; (2) as an economic de-stabiliser when the union power is already high. These results shed some light on the effects of how labour market structures affect out-of equilibrium behaviours in a duopoly in addition to the many established results on how they affect equilibrium behaviours in such a context, and thus also constitute policy warnings for the design of the labour market institutions as regards the important issue of economic stability.
|Item Type:||MPRA Paper|
|Original Title:||Efficient bargaining versus right to manage: a stability analysis with heterogeneous players in a duopoly with quantity competition and trade unions|
|English Title:||Efficient bargaining versus right to manage: a stability analysis with heterogeneous players in a duopoly with quantity competition and trade unions|
|Keywords:||Bifurcation; Cournot; Duopoly; Efficient bargaining; Right to manage|
|Subjects:||J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J51 - Trade Unions: Objectives, Structure, and Effects
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets
D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium
|Depositing User:||Luca Gori|
|Date Deposited:||01. Nov 2011 23:13|
|Last Modified:||08. Oct 2015 01:23|
Agiza, H.N., Elsadany, A.A., 2003. Nonlinear dynamics in the Cournot duopoly game with heterogeneous players. Physica A 320, 512–524.
Bischi, G.I., Kopel, M., 2001. Equilibrium selection in a nonlinear duopoly game with adaptive expectations. Journal of Economic Behavior & Organization 46, 73–100.
Bischi, G.I., Chiarella, C., Kopel, M., Szidarovszky, F., 2010. Nonlinear Oligopolies. Stability and Bifurcations. Berlin: Springer-Verlag.
Booth, A.L., 1995. The Economics of the Trade Union. Cambridge (MA): Cambridge University Press.
Bughin, J., 1995. Unions and strategic managerial incentives. Economics Letters 47, 95–100.
Correa-López, M., Naylor, R.A., 2004. The Cournot-Bertrand profit differential: a reversal result in a differentiated duopoly with wage bargaining. European Economic Review 48, 681–696.
Cournot, A., 1838. Recherches sur les Principes Mathématiques de la Théorie des Richessess. Paris: Hachette.
Dixit, A.K., 1986. Comparative statics for oligopoly. International Economic Review 27, 107–122.
Dowrick, S., 1989. Union-oligopoly bargaining. Economic Journal 99, 1123–1142.
Fanti, L., Gori, L., 2011. A note on trade unions, unemployment insurance, and endogenous growth. Eastern Economic Journal 37, 270–280.
Fanti, L., Meccheri, N., 2011. The Cournot-Bertrand profit differential in a differentiated duopoly with unions and labour decreasing returns. Economics Bulletin 31, 233–244.
Kraft, K., 1998. The codetermined firm in oligopoly. Economics Letters 61, 195–201.
Layard, R., Nickell, S., Jackman, R., 2005. Unemployment. Macroeconomic Performance and the Labour Market. Second Edition. Oxford: Oxford University Press.
Mezzetti, C., Dinopoulos, E., 1991. Domestic unionization and import competition. Journal of International Economics 31, 79–100.
McDonald, I.M., Solow, R.M., 1981. Wage bargaining and employment. American Economic Review 71, 896–908.
Oswald, A.J., 1982. The microeconomic theory of the trade union. Economic Journal 92, 576–595.
Pal, R., Saha, B., 2008. Union-oligopoly bargaining and entry deterrence: a reassessment of limit pricing. Journal of Economics 95, 121–147.
Pencavel, J.H., 1984. The tradeoff between wages and employment in trade union objectives. Quarterly Journal of Economics 99, 215–231.
Pencavel, J.H., 1985. Wages and employment under trade unionism: microeconomic models and macroeconomic applications. Scandinavian Journal of Economics 87, 197–225.
Petrakis, E., Vlassis, M., 2000. Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment? Labour Economics 7, 261–281.
Puu, T., 1991. Chaos in duopoly pricing. Chaos, Solitons and Fractals 1, 573–581.
Puu, T., 1998. The chaotic duopolists revisited. Journal of Economic Behavior & Organization 33, 385–394.
Tramontana, F., 2010. Heterogeneous duopoly with isoelastic demand function. Economic Modelling 27, 350–357.
Zhang, J., Da, Q., Wang, Y., 2007. Analysis of nonlinear duopoly game with heterogeneous players. Economic Modelling 24, 138–148.