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Unionized Labor Market And Divisionalization

Author

Listed:
  • Arijit Mukherjee
  • Udo Broll
  • Soma Mukherjee

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.

Suggested Citation

  • Arijit Mukherjee & Udo Broll & Soma Mukherjee, 2006. "Unionized Labor Market And Divisionalization," Discussion Papers 06/06, University of Nottingham, School of Economics.
    • Handle: RePEc:not:notecp:06/06
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    File URL: https://www.nottingham.ac.uk/economics/documents/discussion-papers/06-06.pdf
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