The response of union utility to labor-saving innovation is analyzed within a framework of oligopolistic competition in the product market, taking account of wage bargaining under several alternative structures of industrial relations. Conditions are established under which wages and employment will rise or fall in response to innovation. Union opposition tends to occur when union preferences are weighted in favor of jobs and labor demand is perceived to be inelastic. Thus opposition is more likely with industry- or craft-based union organization in noncompetitive industries and is less likely with enterprise unionism in competitive industries.

International differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm. This paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a Cournot or Bertrand market for the final product. The vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports. Optimal policy by the exporting country may require a tax on both exports, or a subsidy on both exports.

This paper presents a theory of government intervention which provides an explanation for “industrial strategy” policies such as R & D or export subsidies in imperfectly competitive international markets. Domestic net welfare is improved by the capture of a greater share of the output of rent earning industries, although the subsidy-ridden noncooperative international equilibrium is jointly suboptimal. Behaviour of governments and firms is modelled as a three stage subgame perfect Nash equilibrium. The assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms.