On the mode of Competition as a Collusive Perspective in Unionized Oligopoly Minas Vlassis †* Maria Varvataki ‡ † Department of Economics, University of Crete, Gallos University Campus, Rethymnon 74100, Greece ‡ Department of Economics, University of Crete, Gallos University Campus, Rethymnon 74100, Greece Abstract In a union-oligopoly framework with differentiated products, this paper endogenizes the mode of product market competition by exploring its strategic role on firms’ incentives for collusion. It is shown that in a one-shot game setup, provided that union members are endowed with risk-neutral and monopoly bargaining power during the negotiations, cartel formation is an unavoidable equilibrium in the product market, hence industry’s outcomes and market participants surpluses/rents e qual to that of collusive play. The cartel is proved to be welfare improving, if and only if products’ substitutability is sufficiently high under Cournot competition. Moreover and given firms’ competition, we conclude that among modes of competition, under Bertrand competition Social Welfare is higher than Cournot, while under a Mix of Strategies it lies in-between. Consequently, it is welfare improving to be a benevolent policy maker that deters cartel formation and gives firms’ incentive for Bertrand competition. JEL Classification: D43; J51; L13 Keywords: Oligopoly; Unions; Collusion * Corresponding Author: Tel.: ++2831077396, Fax: ++2831077404, E-mail address: vlassism@uoc.gr