Downstream competition and profits under different input price bargaining structures

In a vertically related duopoly with input price bargaining, this paper re-examines the downstream firms’ profitability under different market competition degrees. It is shown the rather counterintuitive result that downstream firms earn highest profits with semi-collusion, whose level depends on the upstream bargaining structures, the relative parties’ bargaining power, and the parameters measuring the degree of product differentiation in the downstream market. Concerning social welfare, the key result is that policymakers can tolerate some degree of collusion with decentralized bargaining structures; centralized structures advise for a more procompetitive policy.

Diffusion and Decentralized Bargaining in International Organizations: Evidence from Mercosur's Dispute Settlement Mechanism

How and with what effects do institutions diffuse between international organizations (IOs)? An emerging literature extends a key insight of the study of diffusion processes among states to the international level, establishing that the adoption of institutions in IOs is regularly conditioned by the choices of other IOs. Yet, this literature neglects a key contextual difference between the two settings: unlike in the hierarchically structured organizations that have dominated the literature on diffusion, institutional creation, and change in IOs are the result of decentralized bargaining among sovereign governments. This paper develops a heuristic model that shows how diffusion between IOs shapes decision-making within them through its impact on the institutional preferences of individual governments. The model establishes that, unlike in diffusion processes among states, convergence is an unlikely outcome of diffusion between IOs. By implication, studies that take institutional convergence as their starting point are likely to underestimate the pervasiveness of diffusion effects. I demonstrate these arguments with a case study of the establishment of a regional dispute settlement system in Mercosur, a regional organization in Latin America.

Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort

Allowing downstream retailers to engage in demand-enhancing investment, this paper demonstrates that the classical conclusions regarding the comparison of Cournot and Bertrand competition in a vertically related market with decentralized bargaining are completely reversed. It shows that Bertrand competition is more efficient than Cournot competition, in the sense that both consumer surplus and social welfare are always higher in the former.

Managerial Delegation of Competing Vertical Chains with Vertical Externality

We examine that the bilateral supplier affects the incentive contracts that owners of retailers offer their managers, assuming that the manufacturer sets the input price after observing the terms of the incentive contracts offered to management in the downstream market. Thus, we compare the two models: (1) decentralized bargaining between manufacturers and retailers including two-part tariff contract (2) linear input pricing without bargaining. Contrast to previous studies, we find that in equilibrium, the owners of retailers offer delegation contracts to managers for output restriction regardless of competition modes when offering linear input pricing, which implies that owners do not face a prisoners’ dilemma situation and Pareto superior profit is obtained for retailer. Thus, managerial delegation of retailer is not socially desirable due to the output restriction. Furthermore, decentralized bargaining allows to equalize all the equilibrium outcomes in the different delegation structure under both Bertrand and Cournot competition and leads no delegation for the endogenous delegation problem.

Time is on whose side? Determining the duration of collective agreements in a decentralized collective bargaining system

This article examines how the union and management determine the duration of the collective agreement in a decentralized bargaining system characterized by the absence of a rule establishing a maximum duration. Based on information on a population of over 5000 collective agreements and bargaining pairs from the Canadian province of Québec, our analysis reveals that establishment-level collective agreement duration is the result of general economic conditions, but also of coercive comparisons, as well as the parties’ resources and capacities and relative bargaining power, and the characteristics of their interactions. This case shows how contract duration is a strategic issue in establishment-level negotiations where the balance of power generally favours employers.

The Exposure Problem and Market Design

Markets have an exposure problem when getting to the optimal allocation requires a sequence of transactions which if started but not completed leaves at least one trader with losses. We use laboratory experiments to evaluate the effect of the exposure problem on alternative market mechanisms. The continuous double auction performs poorly: efficiency is only 20% when exposure is high and 55% when it is low. A package market effectively eliminates the exposure problem: in low and high-exposure treatments efficiency is 82% and 89%, respectively. Building on stability notions from matching theory we introduce the concept of mechanism stability. A model of trade that combines mechanism stability with noisy best responses and imperfect foresight explains the difference in market performance. Finally, decentralized bargaining with contingent contracts performs well with perfect information and communication but not in the more realistic case when traders’ preferences are privately known.

Partnership under pressure: A process perspective on decentralized bargaining in Danish and Australian manufacturing

Decentralization of collective bargaining has become widespread in developed economies, and EU policies have pushed this trend further. We use process-tracing methodology to explore the consequences of decentralization for the reproduction of partnership bargaining relations at company level. We compare two cases of decentralized bargaining in manufacturing, one in Denmark and one in Australia. Agreement-based decentralization seems to offer better process conditions for reproduction of local partnership compared to decentralization regulated by law. This implies that future decentralization measures should be negotiated rather than imposed.