Is Price Competition More Efﬁcient than Quantity
Competition? A Reversal with Unionized Oligopolists
Published online: 1 February 2016
Ó Springer Science+Business Media New York 2016
Abstract In the context of union-duopoly decentralized bargaining, we argue that,
prior to the realization of any employment and production plans, ﬁrms and unions
may collectively decide about their bargaining agenda. That is, whether they will
subsequently negotiate about only wages (‘‘Right-to-Manage’’) or about both wages
and employment (‘‘Efﬁcient Bargains’’). We show that under price competition in
the product market the equilibrium bargaining agendas always involve only wages.
Under quantity competition, however, and provided that the union bargaining power
is low enough, one ﬁrm/union pair agrees on Efﬁcient Bargains while the other pair
agrees on Right-to-Manage. Thus, if sufﬁcient product differentiation among ﬁrms
exists, then social welfare can be higher under quantity competition than under price
competition; the role of unions is critical for this result.
Keywords Bargaining agenda Oligopoly Mode of competition
JEL Classiﬁcation J50 J51 J53 L13
We are indebted to two anonymous referees and the editor, whose valuable comments and suggestions
helped us to improve signiﬁcantly upon the previous version of this paper. The usual disclaimer applies.
& Minas Vlassis
Department of Economics, University of Crete, University Campus at ‘‘Gallos’’,
74100 Rethymno, Crete, Greece
Rev Ind Organ (2016) 49:103–126