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Dynamic collective bargaining. Frictional effects under open-shop industrial relations

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  • Cabo, Francisco
  • Martín-Román, Ángel L.

Abstract

A dynamic Stackelberg game analyzes collective bargaining between a trade union (leader) and a firm (follower) in a monopoly union model. Frictional effects (FE) for the firm encompass symmetric adjustment costs linked to the number of hired and fired workers, plus a wage-dependent term (assuming wage-dependent hiring costs and wage discrimination against newcomers). The union faces marginally increasing costs in firings and marginally decreasing benefits from hirings. The two-part FE for the firm, the FE for the union, or both jointly considered differently affect employment and wages. Interestingly, standard adjustment costs increase hirings, even while the union reduces wages.

Suggested Citation

  • Cabo, Francisco & Martín-Román, Ángel L., 2017. "Dynamic collective bargaining. Frictional effects under open-shop industrial relations," MPRA Paper 77562, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:77562
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    References listed on IDEAS

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    More about this item

    Keywords

    dynamic labor demand; collective wage bargaining; monopoly union model; adjustment costs; Stackelberg differential game;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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