Strategic Profit Sharing In A Unionized Differentiated Goods Duopoly
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Strategic Profit-Sharing in a Unionized Differentiated Goods Duopoly
Author | : Emmanuel Petrakis |
Publisher | : |
Total Pages | : 36 |
Release | : 2018 |
Genre | : |
ISBN | : |
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We study firms' incentives to offer profit-sharing schemes in a unionized differentiated goods duopoly in which firms bargain with a sector-wide union or firm-specific unions over the selected remuneration schemes. We show that unions always prefer to form a sector-wide union and conduct coordinated bargaining. Under Cournot competition, ex-ante symmetric firms may choose to offer different remuneration schemes under coordinated bargaining and become ex-post asymmetric. Moreover, universal profit-sharing schemes arise as long as the union's bargaining power is low enough. In contrast, under Bertrand competition, firms never offer profit-sharing schemes and universal fixed wage schemes is the unique equilibrium. Our welfare analysis indicates that policymakers should institutionalize decentralized bargaining and encourage profit-sharing schemes.
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