Endogenous timing under price competition and unions
International Journal of Economic Theory
Published online on November 02, 2016
Abstract
We investigate the endogenous order of moves in a duopoly under price competition with a unionized labor market. We show that the established results are not robust to the presence of unions. We find that when product substitutability is sufficiently high and unions are sufficiently wage‐interested the sub‐perfect equilibrium is the simultaneous choice of prices by firms (in sharp contrast to the received literature) and, moreover, the well‐known result that in price games there is always a preference for being a follower no longer holds true under unionization.