UNIONIZED LABOR MARKET AND DIVISIONALIZATION

Arijit Mukherjee, Udo Broll and Soma Mukherjee

Discussion Papers from University of Nottingham, School of Economics

Abstract: We show the incentive for divisionalization by a monopolist producer. In contrast to the previous literature, where divisionalization occurs for product market advantage, we show that divisionalization occurs if it provides strategic advantage in the labor market. With unionized labor market, we show that divisionalization by a monopolist is profitable under both uniform and discriminatory wage setting by the union. However, the incentive for divisionalization is higher under the former situation. We consider divisionalization under both quantity and price competition, and the incentive for divisionalization is found to be higher under price competition.

Keywords: Discriminatory wage setting; Divisionalization; Labor union; Price competition; Quantity competition; Uniform wage setting (search for similar items in EconPapers)
Date: 2006-06
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Persistent link: https://EconPapers.repec.org/RePEc:not:notecp:06/06

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