Can a merger from duopoly to monopoly be detrimental for profits? This paper deals with this issue by focusing on the interaction between decreasing returns to labour (which imply firms’ convex costs) and centralized unionization. First, it is highlighted that a wage ‘non‐rigidity’...

This paper compares the welfare outcomes obtained under alternative unionization regimes (decentralized vs. centralized wage setting) in a duopoly market, in which shareholders delegate strategic decisions to biased (overconfident or underconfident) managers. In such a framework, the common...