Quality choice, vertical product differentiation, and labor-managed oligopoly

Although quality choice of profit-maximizing oligopolistic firms has been widely analyzed, it is rare to find such an analysis of labor-managed oligopolistic firms. This paper considers the relationship between vertical product differentiation and labor-managed firms in either partial or full market coverage by using a two-stage game model. At the second stage they are involved in either Bertrand or Cournot competition. Then some results, which are different from those derived from the conventional firms, are obtained. For example, 1) when labor-managed firms are involved in price competition in an output market, there exists an interior solution only in an extremely limited case; 2) fixed costs affect not only price and output levels but also the level of quality under both price and quantity competition; and 3) it is impossible to analyze under full market coverage, irrespective of whether labor-managed firms are involved in price or quantity competition in an output market