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A model of Bilateral Bargaining in the Labour Market

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  • Ellis, Christopher J

Abstract

In this paper we combine several strands of basic economic theory to provide a structure for analysing bileratal bargaining in the labour market. Using a quadratic revenue function and a Cobb-Douglas utility function largely for expositional ease, we derive isoprofit and isoutility curves for one firm and union respectively. These curves are used to derive efficient bargaining loci after the manner of Cartter (1959). We then introduce the concept of a bargaining core and demonstrate how different cores deriving from different preferences may be catagorized. We then consider four particular solutions to the bargaining process, the monopolist, monopsonist, Nash and "market power" outcomes. The comparative static properties of these solutions are then examined. Finally in an appendix we consider the general case of the problem and demonstrate which aspects of our earlier analysis are not dependent upon the particular functional forms.

Suggested Citation

  • Ellis, Christopher J, 1980. "A model of Bilateral Bargaining in the Labour Market," The Warwick Economics Research Paper Series (TWERPS) 186, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:186
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/1978-1988/twerp186.pdf
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