Profit sharing as entry deterrence mechanism

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• 作者：Domenico Buccella
• 关键词：Union ; oligopoly bargaining ; Fixed wage ; Profit ; sharing ; Entry deterrence effect
• 刊名：Portuguese Economic Journal
• 出版年：2016
• 出版时间：April 2016
• 年：2016
• 卷：15
• 期：1
• 页码：17-31
• 全文大小：742 KB
• 刊物主题：Economics general;
• 出版者：Springer Berlin Heidelberg
• ISSN：1617-9838

文摘

In a right-to-manage framework, this paper analyzes the optimal choice of the pay scheme (profit sharing vs. fixed wage) in a unionized duopoly with potential market entry and decentralized bargaining. The paper shows that, depending on the institutional features, both pay systems can arise as equilibria in Nash strategies. Under duopoly with committed bargaining, the fixed wage is the Nash equilibrium; with flexible bargaining, an agreement between the incumbent firm and its union about profit sharing arises as Nash equilibrium, if the union is not too strong. A monopoly with threat of entry reinforces the selection of profit sharing as a deterrent mechanism.