Strike Activity and Bertrand vs Cournot Competition

Abstract

We develop a model of wage determination with private information in a unionized imperfectly competitive industry. Under two different bargaining structures (firm-level vs industry-level), we investigate the effects of the degree of product differentiation and the type of market competition (Bertrand vs Cournot competition) on the negotiated wage and the strike activity. If the wage bargaining takes place at the industry-level, then both the wage outcome and the strike activity do not depend on the degree of product differentiation whatever the type of market competition. However, if the wage bargaining takes place at the firm-level, then wages and strikes are increasing with the degree of product differentiation, and the strike activity is smaller under Bertrand than under Cournot competition.Bertrand competition; Cournot competition; product differentiation; wage bargaining; strike activity