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Optimal Contracts for Vertically Connected, Unionized Duopolies

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  • Thomas Grandner

    (Department of Economics, Vienna University of Economics & B.A.)

Abstract

In this paper a vertically structured duopolistic market with unionized price setting firms is analyzed. The form of the contract of the transactions between upstream and downstream firms can be linear pricing, franchising or vertical integration. It is known from literature (Irmen (1997)) that the price elasticity of the industry demand and the degree of product differentiation are the decisive factors in the determination of the profit maximizing form of the contract. In this paper it is shown that the bargaining power of the union is an additional factor. With a higher bargaining power linear pricing becomes less preferable.

Suggested Citation

  • Thomas Grandner, 2000. "Optimal Contracts for Vertically Connected, Unionized Duopolies," Department of Economics Working Papers wuwp071, Vienna University of Economics and Business, Department of Economics.
    • Handle: RePEc:wiw:wiwwuw:wuwp071
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    References listed on IDEAS

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    More about this item

    Keywords

    Vertical Integration; Trade Unions;

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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