Wage versus efficient bargaining in oligopoly

Abstract

This paper combines internal bargaining between firms and their employees with a situation of imperfect competition, in particular a Cournot-oligopoly. Wage bargaining is compared with simultaneous negotiations on wages and employment (efficient bargaining). It turns out that for a large range of parameter values a prisoner's dilemma concerning profits exists. The dominant strategy is efficient bargaining, while the joint profits are maximized with wage negotiations. A simplified example considers economic welfare and utility of the unions. Different welfare measures are considered like the usual IO measure of consumer and producer surplus as well as others. The term 'efficient bargaining' is not justified (at least for the present example) if the profits and the rents of the unions are considered, as these are maximized with wage bargaining. However, consumer and producer surplus are highest with efficient bargaining. Copyright © 2006 John Wiley & Sons, Ltd.

Union–firm Bargaining Agenda Revisited: When Unions Have Distinct Preferences

“…This paper adds to a line of research in the economics literature which analyses the choice of the bargaining scope in union‐oligopoly negotiations; see Dobson (); Bughin (); Petrakis and Vlassis (); Kraft (), Buccella (); Schroeder and Tremblay (); Fanti (, ); Fanti and Buccella (), and Buccella and Fanti ().…”

“…Under these assumptions, the authors find that, in equilibrium, EB never arises as the industry bargaining practice: all units select RTM if the unions’ power is sufficiently large, or one firm RTM and the rival EB if the unions’ power is sufficiently low. Similarly, Kraft () assumes that, in a duopoly, the RTM firm is the Stackelberg leader in the product market. However, in contrast to Petrakis and Vlassis (), Kraft () finds that EB is firms’ dominant strategy, leading them to face a ‘prisoner's dilemma’ situation with regard to profits.…”

(Local) Wage Settings and (International) Entry Deterrence

“…Authors such as Davidson (1988), Horn and Wolinsky (1988a,b), Dowrick (1989), Bárcena-Ruiz and Garzón (2002), Petrakis andVlassis (2000, 2004), Lommerud, Straume, and Sørgard (2005), Kraft (2006), Mukherjee (2010), Symeonidis (2008Symeonidis ( , 2010, Mukherjee and Pennings (2011) and Fanti and Gori (2013) have examined the outcomes of different wage bargaining structures in oligopolies. De Fraja (1993), Dobson (1994) and Banerji (2002) further extend the analysis of sequential wage bargaining in unionized oligopolies.…”

When unionisation is profitable for firms in network industries

“…A large strand of the literature on oligopoly markets has assumed as given the finding that the labour market is characterised by the presence of unions and, as a consequence, the firms operating in the market are unionised (e.g., Fanti, 2014Fanti, , 2015Kraft, 2006;Petrakis & Vlassis, 2000). The contributions of Bughin (1995) and Vannini and Bughin (2000) are notable exceptions.…”