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Codetermination, Price Competition and the Network Industry

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Published/Copyright: December 7, 2019
German Economic Review
From the journal German Economic Review Volume 20 Issue 4

Abstract

This research develops a tractable two-stage non-cooperative game with complete information describing the behaviour of price-setting firms that must choose to be profit maximisers or bargainers under codetermination in a network industry with horizontal product differentiation. The existing theoretical literature has already shown that codetermination might arise as the endogenous market outcome in a strategic competitive quantity-setting duopoly. In sharp contrast with this result, the present article shows that codetermination does never emerge as a Nash equilibrium in a price-setting non-network duopoly. Then, it aims at highlighting the role of network externalities in determining changes of paradigm of the game and letting codetermination become a sub-game perfect Nash equilibrium when prices are strategic substitutes or strategic complements. This equilibrium may be Pareto efficient. Results allow distinguishing between mandatory codetermination and voluntary codetermination. The article also proposes a model of endogenous codetermination according to which every firm may choose to bargain with its own corresponding union bargaining unit only whether the firm’s bargaining strength is exactly the profit-maximising one. The equilibrium outcomes emerging in this case range from a uniform Nash equilibrium, in which both firms are codetermined, to mixed Nash equilibria, in which only one of them chooses to be codetermined. These results are ‘network depending’ and do not hold in a non-network duopoly.

Keywords: Codetermination; network externalities; price competition
Published Online: 2019-12-07
Published in Print: 2019-12-01

© 2019 by Walter de Gruyter Berlin/Boston

Articles in the same Issue

  1. Public Preferences for Government Spending Priorities: Survey Evidence from Germany
  2. Structural Changes in the Labor Market and the Rise of Early Retirement in France and Germany
  3. Tax Composition and Growth: A Broad Cross-country Perspective
  4. Sharing the Burden? Empirical Evidence on Corporate Tax Incidence
  5. Wage Performance of Immigrants in Germany
  6. New Evidence on the Effects of the Shortened School Duration in the German States: An Evaluation of Post-secondary Education Decisions
  7. Should Forecasters Use Real-Time Data to Evaluate Leading Indicator Models for GDP Prediction? German Evidence
  8. Worker Personality: Another Skill Bias beyond Education in the Digital Age
  9. Changes in Occupational Tasks and Their Association with Individual Wages and Occupational Mobility
  10. Is There a Glass Ceiling over Germany?
  11. Thoughts on a Fiscal Union in EMU
  12. Analyzing the Efficiency of County Road Production – Evidence from Eastern German Counties
  13. Interregional Migration of Human Capital and Unemployment Dynamics: Evidence from Italian Provinces
  14. Predatory Short Sales and Bailouts
  15. Coaching, Counseling, Case-Working: Do They Help the Older Unemployed Out of Benefit Receipt and Back Into the Labor Market?
  16. The Productivity Effects of Worker Mobility Between Heterogeneous Firms
  17. A Synthetic Control Assessment of the Green Paradox: The Role of Climate Action Plans
  18. Where Does the Good Shepherd Go? Civic Virtue and Sorting into Public Sector Employment
  19. Cyber Technology and the Arms Race
  20. Elementary Index Bias: Evidence for the Euro Area from a Large Scanner Dataset
  21. Conservative Politicians and Voting on Same-sex Marriage
  22. A Novel Housing Price Misalignment Indicator for Germany
  23. Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited
  24. Management Practices and Productivity in Germany
  25. Take Your Time to Grow: A Field Experiment on the Hiring of Youths
  26. Codetermination, Price Competition and the Network Industry
  27. Let the Data Speak? On the Importance of Theory-Based Instrumental Variable Estimations
  28. The Inherited Inequality: How Demographic Aging and Pension Reforms can Change the Intergenerational Transmission of Wealth
  29. Competing for Good Immigrants
  30. Regional Impact of the German Rent Brake
  31. Optimal Social Insurance and Health Inequality
  32. Goal Setting, Information, and Goal Revision: A Field Experiment
  33. State-Dependent Forward Guidance and the Problem of Inconsistent Announcements
  34. Capital adjustment cost and inconsistency in income-based dynamic panel models with fixed effects
  35. In Search of an Appropriate Lower Bound. The Zero Lower Bound vs. the Positive Lower Bound under Discretion and Commitment
  36. The Impact of Direct Cash Payments on Whole Blood Supply
  37. Issue Information
  38. Output Growth Decomposition in the Presence of Input Quality Effects: A Stochastic Frontier Approach
  39. Accounting for Sustainable Development over the Long-Run: Lessons from Germany
  40. Changes in US Monetary Policy and Its Transmission over the Last Century
  41. Why Did Income Inequality in Germany Not Increase Further After 2005?
  42. Acknowledgements
  43. Index
https://doi.org/10.1111/geer.12190
Keywords for this article
Codetermination; network externalities; price competition

Articles in the same Issue

  1. Public Preferences for Government Spending Priorities: Survey Evidence from Germany
  2. Structural Changes in the Labor Market and the Rise of Early Retirement in France and Germany
  3. Tax Composition and Growth: A Broad Cross-country Perspective
  4. Sharing the Burden? Empirical Evidence on Corporate Tax Incidence
  5. Wage Performance of Immigrants in Germany
  6. New Evidence on the Effects of the Shortened School Duration in the German States: An Evaluation of Post-secondary Education Decisions
  7. Should Forecasters Use Real-Time Data to Evaluate Leading Indicator Models for GDP Prediction? German Evidence
  8. Worker Personality: Another Skill Bias beyond Education in the Digital Age
  9. Changes in Occupational Tasks and Their Association with Individual Wages and Occupational Mobility
  10. Is There a Glass Ceiling over Germany?
  11. Thoughts on a Fiscal Union in EMU
  12. Analyzing the Efficiency of County Road Production – Evidence from Eastern German Counties
  13. Interregional Migration of Human Capital and Unemployment Dynamics: Evidence from Italian Provinces
  14. Predatory Short Sales and Bailouts
  15. Coaching, Counseling, Case-Working: Do They Help the Older Unemployed Out of Benefit Receipt and Back Into the Labor Market?
  16. The Productivity Effects of Worker Mobility Between Heterogeneous Firms
  17. A Synthetic Control Assessment of the Green Paradox: The Role of Climate Action Plans
  18. Where Does the Good Shepherd Go? Civic Virtue and Sorting into Public Sector Employment
  19. Cyber Technology and the Arms Race
  20. Elementary Index Bias: Evidence for the Euro Area from a Large Scanner Dataset
  21. Conservative Politicians and Voting on Same-sex Marriage
  22. A Novel Housing Price Misalignment Indicator for Germany
  23. Epstein–Zin Utility, Asset Prices, and the Business Cycle Revisited
  24. Management Practices and Productivity in Germany
  25. Take Your Time to Grow: A Field Experiment on the Hiring of Youths
  26. Codetermination, Price Competition and the Network Industry
  27. Let the Data Speak? On the Importance of Theory-Based Instrumental Variable Estimations
  28. The Inherited Inequality: How Demographic Aging and Pension Reforms can Change the Intergenerational Transmission of Wealth
  29. Competing for Good Immigrants
  30. Regional Impact of the German Rent Brake
  31. Optimal Social Insurance and Health Inequality
  32. Goal Setting, Information, and Goal Revision: A Field Experiment
  33. State-Dependent Forward Guidance and the Problem of Inconsistent Announcements
  34. Capital adjustment cost and inconsistency in income-based dynamic panel models with fixed effects
  35. In Search of an Appropriate Lower Bound. The Zero Lower Bound vs. the Positive Lower Bound under Discretion and Commitment
  36. The Impact of Direct Cash Payments on Whole Blood Supply
  37. Issue Information
  38. Output Growth Decomposition in the Presence of Input Quality Effects: A Stochastic Frontier Approach
  39. Accounting for Sustainable Development over the Long-Run: Lessons from Germany
  40. Changes in US Monetary Policy and Its Transmission over the Last Century
  41. Why Did Income Inequality in Germany Not Increase Further After 2005?
  42. Acknowledgements
  43. Index
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