Stability in a Cournot duopoly under asymmetric unionism

Luciano Fanti and Luca Gori ()

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: We analyse the stability issue in a Cournot duopoly with asymmetric unionism and heterogeneous players. We show that labour market institutions matter or the stability of the unique interior Cournot-Nash equilibrium. Interestingly, the role played by the existence of firm-specific unions on stability, when the degree of unionism is asymmetric between the two firms, is at all different depending on whether the (more) unionised firm has bounded rational or naive expectations. Indeed, a shift in the union's preference from employment towards wages acts as an economic (de)stabiliser when workers are paid with the (competitive) unionised wage by the bounded rational firm and with the (unionised) competitive wage by the naive firm.

Keywords: Bifurcation; Cournot; Heterogeneous expectations; Monopoly union. (search for similar items in EconPapers)
JEL-codes: C62 D43 J51 L13 (search for similar items in EconPapers)
Date: 2011-01-09
New Economics Papers: this item is included in nep-bec and nep-ind
Note: ISSN 2039-1854
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Working Paper: Stability in a Cournot duopoly under asymmetric unionism (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2011/123

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