Skip to main content
Article thumbnail
Location of Repository

The Cournot-Bertrand profit differential: a reversal result in a differentiated duopoly with wage bargaining

By Mónica Correa López and Robin Naylor


This paper compares Cournot and Bertrand equilibria in a downstream differentiated duopoly in which the input price (wage) paid by each downstream firm is the outcome of a strategic bargain with its upstream supplier (labour union). We show that the standard result that Cournot equilibrium profits exceed those under Bertrand competition - when the differentiated duopoly game is played in imperfect substitutes - is reversible. Whether equilibrium profits are higher under Cournot or Bertrand competition is shown to depend upon the nature of the upstream agents’ preferences, on the distribution of bargaining power over the input price and on the degree of product market differentiation. We find that the standard result holds unless unions are both powerful and place considerable weight on the wage argument in their utility function. One implication of this is that if the upstream agents are profit-maximising firms, then the standard result will obtain

Topics: HD
Publisher: University of Warwick, Department of Economics
Year: 2001
OAI identifier:

Suggested articles


  1. (2000). A note on price and quantity competition in differentiated oligopolies. doi
  2. (1988). Bilateral monopolies and incentives for merger. doi
  3. (1985). Comparing Bertrand and Cournot equilibira: a geometric approach. doi
  4. (1997). Comparing Cournot and Bertrand in a homogenous product market. doi
  5. (1998). International trade and economic integration when labour markets are generally unionised. doi
  6. (1985). Multimarket oligopoly: strategic substitutes and complements. doi
  7. (1988). Multiunit bargaining in oligopolistic industries. doi
  8. (1997). On the dynamic efficiency of Bertrand and Cournot equilibria. doi
  9. (1985). On the efficiency of Bertrand and Cournot equilibria with product differentiation. doi
  10. (1984). Price and quantity competition in a differentiated duopoly. doi
  11. (1997). Prisioners’ dilemma in duopoly (super) games. doi
  12. (1999). The firms’ indifference surface,
  13. (1999). Union wage strategies and international trade, doi
  14. (1989). Union-oligopoly bargaining. doi
  15. (2001). Unions in oligopolistic, vertically connected industries. doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.