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Wage Bargaining with a Price-Setting Firm

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  • Arnsperger, Christian
  • de la Croix, David

Abstract

This paper examines the introduction of monopolistic competition into wage bargaining models: in addition to capital-labour substitution, we also consider a cost-push effect. The right-to-manage model requires strong restrictions on the objective functions and leads to problematic conclusions because the wage claims of the union are generally not compatible with the mark-up requirement contained in the firm's price equation. In the efficient bargaining model, the union negotiates also the employment level, which gives it a way of extracting part of the monopoly rent: the firm's commitment to an efficient wage-employment combination forces it to follow a pricing rule such that part of the surplus is transferred to the union. Copyright 1990 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Suggested Citation

  • Arnsperger, Christian & de la Croix, David, 1990. "Wage Bargaining with a Price-Setting Firm," Bulletin of Economic Research, Wiley Blackwell, vol. 42(4), pages 285-298, October.
    • Handle: RePEc:bla:buecrs:v:42:y:1990:i:4:p:285-98
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    Cited by:

    1. Wapler, Rüdiger, 2000. "Unions, monopolistic competition and unemployment," Tübinger Diskussionsbeiträge 180, University of Tübingen, School of Business and Economics.
    2. José Ramón García & Valeri Sorolla, 2014. "Monopolistic Competition and Different Wage Setting Systems," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 48-77, February.
    3. Bae-Geun Kim, 2016. "Explaining movements of the labor share in the Korean economy: factor substitution, markups and bargaining power," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(3), pages 327-352, September.
    4. Bae-Geun Kim, 2016. "Explaining movements of the labor share in the Korean economy: factor substitution, markups and bargaining power," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(3), pages 327-352, September.
    5. Fitzenberger, Bernd & Kohn, Karsten, 2006. "Skill Wage Premia, Employment, and Cohort Effects: Are Workers in Germany All of the Same Type?," IZA Discussion Papers 2185, Institute of Labor Economics (IZA).
    6. Wapler, Rüdiger, 2001. "Unions, efficiency wages, and unemployment," Tübinger Diskussionsbeiträge 210, University of Tübingen, School of Business and Economics.

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