Upstream Mergers, Downstream Mergers, and Unionized Oligopoly

In a duopolistic industry characterized by unobserved vertical contracts, and where there are two vertical chains with two upstream manufacturers selling to two downstream retailers, we show that the wage is jointly determined by the union and the firm through bargaining and that the wage bargaining...

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Bibliographic Details
Published in:The American Economist (New York, N.Y. 1960) N.Y. 1960), 2005-10, Vol.49 (2), p.67-74
Main Author: Chang, Shu-hua
Format: Article
Language:English
Subjects:
Acquisitions & mergers
Bargaining
Bargaining power
Company business management
Duopolies
Economic conditions
Employment
Fees
Labor unions
Management
Marginal costs
Retail industries
Retail industry
Retail prices
Retail stores
Retail trade
Streams
Studies
Vertical integration
Wages & salaries
Wholesale prices
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Summary:In a duopolistic industry characterized by unobserved vertical contracts, and where there are two vertical chains with two upstream manufacturers selling to two downstream retailers, we show that the wage is jointly determined by the union and the firm through bargaining and that the wage bargaining power of the union under different regimes, regardless of whether an upstream merger or a downstream merger takes place, will determine the degree of the welfare damage effect. It is also found that an upstream or a downstream monopolist, regardless of whether it possesses the right to franchise, will exert no impact on the equilibrium outputs and total profit, and will only affect the distribution of profits within the vertical chain.
ISSN:0569-4345
2328-1235
DOI:10.1177/056943450504900208