In this chapter, we consider unionization structure and show that in
quantity competition, the total utilities of the decentralised unions are higher
than the utility of the centralised union only if the centralised union charges a
uniform wage and the firms’ productivity differences are large irrespective of
product differentiation; in price competition, the total utilities of the
decentralised unions are higher than the utility of the centralised union only if
the centralised union charges a uniform wage with the firms’ productivity
differences are large and the degree of product differentiation is small. Total
profits in Bertrand competition are less than Cournot competition under
differentiated duopoly with firm heterogeneity and hence, the standard result
on the ranking of Cournot and Bertrand profits is not reversed with the
productivity difference and unionization structures. In addition, the social
welfare is always higher under Bertrand competition than under Cournot
competition irrespective of unionization structures.
Keywords: Asymmetric firms, centralised union, consumer surplus,
Cournot-Bertrand comparisons, decentralised unions, differentiated
products, labour productivity, price competition, productivity differences,
quantity competition, right-to-manage model, social welfare, union wage,
unionization structure, utility.
