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When unionisation is profitable for firms in network industries
Author(s) -
Fanti Luciano,
Buccella Domenico
Publication year - 2019
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12249
Subject(s) - outcome (game theory) , economics , wage , microeconomics , wage bargaining , pareto principle , nash equilibrium , pareto optimal , face (sociological concept) , labour economics , operations management , multi objective optimization , computer science , machine learning , social science , sociology
In an industry characterised by the presence of network effects, this paper investigates a duopolistic game in which firms may choose whether to bargain over wages and employment with unions or to face a competitive labour market (i.e., without unions). If unions are sufficiently wage‐sensitive, it is shown that the presence of sufficiently large network effects makes unionisation the Pareto efficient sub‐game perfect Nash equilibrium outcome for firms.