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The effects of entry in oligopoly with bargained wages
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Naylor, Robin and Soegaard, Christian (2014) The effects of entry in oligopoly with bargained wages. Working Paper. University of Warwick. Department of Economics. Warwick economics research papers series (TWERPS), Volume 2014 (Number 1044). (Unpublished)
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Official URL: http://www2.warwick.ac.uk/fac/soc/economics/resear...
Abstract
We show that a firm's profits under Cournot oligopoly can be increasing in the number of firms in the industry if wages are determined by decentralised bargaining in unionised bilateral oligopoly. The intuition for the result is that increased product market competition following an increase in the number of firms is mirrored by increased labour market rivalry which induces (profit-enhancing) wage moderation. Whether the product or labour market effect dominates depends both on the extent of union bargaining power and on the nature of union preferences. An incumbent monopolist will have an incentive to accommodate entry if the labour market effect dominates. We also show that this incentive is stronger if the incumbent anticipates that, post entry, it will be able to act as a Stackelberg leader.
| Item Type: | Working or Discussion Paper (Working Paper) | ||||
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| Subjects: | H Social Sciences > HB Economic Theory | ||||
| Divisions: | Faculty of Social Sciences > Economics | ||||
| Library of Congress Subject Headings (LCSH): | Oligopolies, Wage bargaining, Profit | ||||
| Series Name: | Warwick economics research papers series (TWERPS) | ||||
| Publisher: | University of Warwick. Department of Economics | ||||
| Official Date: | 2 April 2014 | ||||
| Dates: |
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| Volume: | Volume 2014 | ||||
| Number: | Number 1044 | ||||
| Number of Pages: | 19 | ||||
| Institution: | University of Warwick | ||||
| Status: | Not Peer Reviewed | ||||
| Publication Status: | Unpublished | ||||
| Access rights to Published version: | Open Access (Creative Commons) | ||||
| Date of first compliant deposit: | 28 July 2016 | ||||
| Date of first compliant Open Access: | 28 July 2016 |
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