Strategic Managerial Incentives in an Unionized Duopoly

This note reconsiders the problem of managerial incentives in the context of an unionized Nash-Cournot oligopoly. It is hightlighted that managerial incentives weaken union power at industry equilibrium, although, as a symptom of a prisoner dilemma, unions are not reluctant to the existence of those managerial contracts. A direct consequence of this finding is that the adequate employer’s utility function when modelling wage negotiation outcomes should be different from simple firm profit-maximization.