Profits and Competition in a Unionized Duopoly Model with Product Differentiation and Labour Decreasing Returns

Luciano Fanti and Nicola Meccheri ()

Working Paper series from Rimini Centre for Economic Analysis

Abstract: In this paper, we aim at investigating if the conventional wisdom, that an increase of competition linked to a decrease in the degree of product differentiation always reduces firms' profits, remains true in a unionized duopoly model with labour decreasing returns. In this context, mixed results emerge. In particular, we show that a decrease in the degree of product differentiation may affect wages, hence profits, differently, depending on both the mode of competition in the product market (Cournot or Bertrand competition) and the particular unionization structure (firm-specific or industry-wide union(s)). Interestingly, it is shown that the conventional wisdom can actually be reversed, even if under Bertrand competition only.

Keywords: unionized duopoly; labour decreasing returns; product differentiation; profits (search for similar items in EconPapers)
JEL-codes: J43 J50 L13 (search for similar items in EconPapers)
Date: 2012-02
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Profits and competition in a unionized duopoly model with product differentiation and labour decreasing returns (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:06_12

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