The codetermined firm in a Cournot duopoly: A stability analysis |
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Authors: | Luciano Fanti Luca Gori |
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Affiliation: | Department of Economics, University of Pisa, Via Cosimo Ridolfi, 10, I‐56124 Pisa (PI), Italy; Department of Law and Economics “G.L.M. Casaregi”, University of Genoa, Via Balbi, 30/19, I‐16126 Genoa (GE), Italy |
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Abstract: | This paper aims to study the stability issue in a Cournot duopoly with codetermined firms. We show that when both firms codetermine employment together with decentralised employees' representatives, a rise in wages acts as an economic (de)stabiliser when the wage is fairly (high) low, while under profit maximisation a rise in wages always acts as a stabilising device because the parametric stability region monotonically increases with the wage in such a case. Moreover, a rise in the union's bargaining power has a de-stabilising effect, except when the wage is low and the firm power is already high. Therefore, under codetermination a change either in the wage or firm power in the Nash bargaining plays an ambiguous role on stability. We also show with numerical simulations that complex dynamics can also occur. |
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Keywords: | C62 D43 L13 |
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