Abstract |
This PhD Thesis is written and submitted to the Department of Economics of the University
of Crete, Greece, as a partial fulfillment of my obligations as a PhD Candidate. It consists
of three chapters dealing with the corporate governance and the labor relations in vertically
related markets.
In Chapter 1, we deal with the strategic profit–sharing in a unionized differentiated duopoly.
We study firms’ incentives to offer profit-sharing schemes in a unionized differentiated goods
duopoly in which firms bargain with a sector-wide union or firm-specific unions over the
selected remuneration schemes. We show that unions always prefer to form a sector-wide
union and conduct coordinated bargaining. Under Cournot competition, ex-ante symmetric
firms may choose to offer different remuneration schemes under coordinated bargaining
and become ex-post asymmetric. Moreover, universal profit-sharing schemes arise as long as
the union’s bargaining power is low enough. In contrast, under Bertrand competition, firms
never offer profit-sharing schemes and universal fixed wage schemes is the unique equilibrium.
Our welfare analysis indicates that policymakers should institutionalize decentralized
bargaining and encourage profit-sharing schemes.
In Chapter 2, we consider the strategic implications of the disclosure regime of vertical
contract terms. The latter are used in the literature either as observable or as secret. We endogenize
this decision and show that the mode and intensity of the downstream competition, as well as the upstream market structure, play a significant role in the observability of the vertical
contract terms. When a common supplier bargains with each retailer over a two-part tariff
contract, interim observability intensifies the commitment problem, by offering a wholesale
price below the marginal cost. The same holds under linear contracts or Bertrand competition.
On the other hand, under dedicated suppliers, it is more profitable to bargain over interim unobservable
contracts and through them to alleviate the commitment problem. Policymakers
could increase the social welfare by encouraging interim observability (unobservability) when
firms compete in quantities (prices). Monopolized upstream markets are more prone to have
aligned incentives with the policymakers, especially if the downstream retailers compete over
quantities.
Finally, in Chapter 3, we study the incentives for horizontal upstream mergers in a quantity–
setting vertically related industry, under bargain and endogenous contract types. We show
that the contract types used could have important consequences to the equilibrium market
structure and vice versa. If it is the retailers who choose contract types, they share the same
preferences as the policymakers and choose to offer two–part tariff contracts, leading the suppliers
not to merge. This result has some obvious policy implications. If it is the suppliers
who decide contract types, they prefer to merge and offer a partial forward vertical ownership
scheme. Under Bertrand competition, there is always an upstream merger, but the common
manufacturer will offer a two–part tariff contract for intermediate bargain power levels. For
high bargain power levels, he will choose a partial forward vertical ownership scheme, while
for low bargain power will suffer from negative profits. A policymaker, considering the maximization
of the social welfare should consider the upstream merger and two–part tariff contracts.
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