Firms` Strategic Decisions: Theoretical and Empirical Findings

Firms` Strategic Decisions: Theoretical and Empirical Findings

Volume: 2

Indexed in: Book Citation Index, Social Sciences & Humanities, EBSCO.

This is the second volume of the book series featuring empirical research conducted on business decision making policies of oligopolistic organizations. This volume brings together 11 chapters that ...
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Unionization Structure, Profit Differential, and Social Welfare in a Differentiated Duopoly with Heterogeneous Firms

Pp. 29-57 (29)

Chu-chuan Hsu and Leonard F. S. Wang

Abstract

In this chapter, we consider unionization structure and show that in quantity competition, the total utilities of the decentralised unions are higher than the utility of the centralised union only if the centralised union charges a uniform wage and the firms’ productivity differences are large irrespective of product differentiation; in price competition, the total utilities of the decentralised unions are higher than the utility of the centralised union only if the centralised union charges a uniform wage with the firms’ productivity differences are large and the degree of product differentiation is small. Total profits in Bertrand competition are less than Cournot competition under differentiated duopoly with firm heterogeneity and hence, the standard result on the ranking of Cournot and Bertrand profits is not reversed with the productivity difference and unionization structures. In addition, the social welfare is always higher under Bertrand competition than under Cournot competition irrespective of unionization structures.

Keywords:

Asymmetric firms, centralised union, consumer surplus, Cournot-Bertrand comparisons, decentralised unions, differentiated products, labour productivity, price competition, productivity differences, quantity competition, right-to-manage model, social welfare, union wage, unionization structure, utility.

Affiliation:

Wenlan School of Business, Zhongnan University of Economics and Law, 182# Nanhu Avenue, East Lake High-tech Development Zone, Wuhan 430073, China.