Union duopoly with heterogeneous labor: the effect of minimum wage regulation

Purpose – The purpose of this paper is to analyse the labor market outcome when there are two unions in the industry, representing heterogeneous workers – substitutes or complements in production – and using wage strategies, in the presence of minimum wage regulation. Design/methodology/approach – Three strategic environments are considered: symmetric Bertrand‐Nash duopoly, Stackelberg duopoly, and efficient cooperation between the two unions. Findings – Usually, minimum wage legislation (floor) would decrease employment; it is shown that in Stackelberg environment, minimum wage legislation may induce an increase in total employment. Wage‐pushing strategies by a leader may also arise; and if workers are substitutes, entry deterrence strategies by the leader may be observed. Originality/value – This paper analyses the impact of minimum wages in duopoly scenarios in an extensive way.