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Wage versus efficient bargaining in oligopoly

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  • Kornelius Kraft

    (University of Dortmund, Department of Economics, Vogelspothsweg 87, D-44227 Dortmund, Denmark)

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.

Suggested Citation

  • Kornelius Kraft, 2006. "Wage versus efficient bargaining in oligopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(7), pages 595-604.
    • Handle: RePEc:wly:mgtdec:v:27:y:2006:i:7:p:595-604
    DOI: 10.1002/mde.1277
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    References listed on IDEAS

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    Cited by:

    1. Worku Gebeyehu, 2017. "Trade Reforms, Mark-Ups and Bargaining Power of Workers: the Case of Ethiopian Manufacturing Firms," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 25(1), March.
    2. Buccella Domenico & Fanti Luciano, 2019. "Profits Under Centralized Negotiations: The Efficient Bargaining Case," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(2), pages 1-8, June.
    3. Luciano Fanti & Domenico Buccella, 2019. "When unionisation is profitable for firms in network industries," Metroeconomica, Wiley Blackwell, vol. 70(4), pages 711-722, November.
    4. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2020. "Wage Bargaining and Employment Revisited: Separability and Efficiency in Collective Bargaining," CESifo Working Paper Series 8422, CESifo.
    5. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2019. "The Decomposability of the Nash Bargaining Solution in Labor Markets," Working Papers CIE 128, Paderborn University, CIE Center for International Economics.
    6. Fanti, Luciano & Buccella, Domenico, 2015. "Bargaining agenda, timing, and entry," MPRA Paper 64089, University Library of Munich, Germany.
    7. Luciano Fanti, 2014. "Union-Firm Bargaining agenda: Right-to manage or Efficient Bargaining?," Discussion Papers 2014/182, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    8. Domenico Buccella & Luciano Fanti, 2017. "A game-theoretic approach to the choice of union-oligopoly baargaining agenda," Discussion Papers 2017/214, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    9. Luciano Fanti, 2015. "Union–firm bargaining agenda: right-to-manage or efficient bargaining?," Economics Bulletin, AccessEcon, vol. 35(2), pages 936-948.
    10. Luca Gori & Luciano Fanti, 2024. "The co-determination decision game with consumption externalities," Theory and Decision, Springer, vol. 97(2), pages 219-259, September.
    11. Luciano Fanti & Domenico Buccella, 2018. "Union–Firm Bargaining Agenda Revisited: When Unions Have Distinct Preferences," Bulletin of Economic Research, Wiley Blackwell, vol. 70(1), pages 35-50, January.
    12. Domenico Buccella, 2014. "Product market competition with differentiated goods and social welfare in the presence of an industry-wide union," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 13(2), pages 131-140, August.
    13. Buccella, Domenico & Fanti, Luciano, 2020. "Do labour union recognition and bargaining deter entry in a network industry? A sequential game model," Utilities Policy, Elsevier, vol. 64(C).
    14. Claus‐Jochen Haake & Thorsten Upmann & Papatya Duman, 2023. "Wage bargaining and employment revisited: separability and efficiency in collective bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(2), pages 403-440, April.
    15. Luciano Fanti, 2014. "When do firms and unions agree on a monopoly union or an efficient bargaining arrangement?," Discussion Papers 2014/181, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.

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