Union negotiations, product market cooperation, and profits

Abstract

AbstractWithin the context of a unionized duopoly with decentralized Right‐to‐Manage wage negotiations, this paper investigates how different measures of product market cooperation impact firms' profitability. In the presence of exogenous production costs, a classical result in industrial economics is that conjectural derivatives (CD) and conjectural elasticities (CE) lead to similar results, and CE reproduce exactly the same output decision level (and, therefore, profits) of the coefficient of cooperation (CC). These results show that wage bargaining alters those relations; in particular, the equivalence of the CE and CC no longer holds true.