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Endogenous codetermination

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  • Luca Gori
  • Luciano Fanti

Abstract

This research introduces endogenous codetermination in a Cournot duopoly. Unlike the received literature (Kraft, 1998), this work assumes that firms bargain with their own union bargaining units under codetermination if and only if they can choose an ad hoc bargaining effort by maximising profits (three‐stage non‐cooperative game). There are remarkable differences compared with the main findings of the exogenous codetermination literature. Indeed, there may exist asymmetric multiple (Pareto efficient) Nash equilibria in pure strategies. Mandatory codetermination, therefore, is Pareto worsening. Each firm can then use the union bargaining power as a strategic device in a Cournot setting.

Suggested Citation

  • Luca Gori & Luciano Fanti, 2022. "Endogenous codetermination," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(1), pages 272-285, January.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:1:p:272-285
    DOI: 10.1002/mde.3383
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    References listed on IDEAS

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    1. Luciano Fanti & Nicola Meccheri, 2016. "Non-Rigid Wages And Merger Profitability Reversal Under Convex Costs And Centralized Unionization," Bulletin of Economic Research, Wiley Blackwell, vol. 68(4), pages 383-395, October.
    2. White, Mark D., 1996. "Mixed oligopoly, privatization and subsidization," Economics Letters, Elsevier, vol. 53(2), pages 189-195, November.
    3. Luciano Fanti & Domenico Buccella, 2020. "Social Responsibility in a Bilateral Monopoly with Downstream Convex Technology," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 761-776, December.
    4. Fanti Luciano & Gori Luca, 2019. "Codetermination, Price Competition and the Network Industry," German Economic Review, De Gruyter, vol. 20(4), pages 795-830, December.
    5. Kraft, Kornelius, 2001. "Codetermination as a strategic advantage?," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 543-566, March.
    6. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
    7. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    8. repec:bla:scandj:v:95:y:1993:i:3:p:365-75 is not listed on IDEAS
    9. Kraft, Kornelius, 1998. "The codetermined firm in oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 195-201, November.
    10. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-227, March.
    11. Luciano Fanti & Domenico Buccella, 2020. "Publisher Correction: Social Responsibility in a Bilateral Monopoly with Downstream Convex Technology," Journal of Industry, Competition and Trade, Springer, vol. 20(4), pages 777-777, December.
    12. Kraft, Kornelius, 2018. "Productivity and distribution effects of codetermination in an efficient bargaining model," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 458-485.
    13. Luciano Fanti & Nicola Meccheri, 2017. "A Note on Managerial Delegation with Asymmetric and Convex Costs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(3), pages 279-284, April.
    14. Gary Gorton & Frank A. Schmid, 2004. "Capital, Labor, and The Firm: A Study of German Codetermination," Journal of the European Economic Association, MIT Press, vol. 2(5), pages 863-905, September.
    15. Lopez, Monica Correa & Naylor, Robin A., 2004. "The Cournot-Bertrand profit differential: A reversal result in a differentiated duopoly with wage bargaining," European Economic Review, Elsevier, vol. 48(3), pages 681-696, June.
    16. John S. Heywood & Matthew Mcginty, 2007. "Convex Costs And The Merger Paradox Revisited," Economic Inquiry, Western Economic Association International, vol. 45(2), pages 342-349, April.
    17. Fanti, Luciano & Gori, Luca & Sodini, Mauro, 2018. "Codetermination and product differentiation," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 390-403.
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    Cited by:

    1. Luca Gori & Luciano Fanti, 2024. "The co-determination decision game with consumption externalities," Theory and Decision, Springer, vol. 97(2), pages 219-259, September.

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