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Wage Commitment, Signalling, and Entry Deterrence or Accommodation

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Author Info

  • Rupayan Pal
  • Bibhas Saha

Abstract

We analyse the wage choice of a monopoly union against entry threat. The wage carries information about market demand, which is crucial to an uninformed entrant, and in addition affects the entrant's post-entry cost through labour market institutions. The union may wish to deter or accommodate entry depending on whether the entrant will hire from a different source or from the union. Equilibrium wage is distorted downwardly (upwardly) for deterrence (accommodation); but because of wage correlation a low (high) wage can also turn entry profitable (unprofitable). Therefore, separating equilibrium may not always exist, and entry outcomes may be inefficient. Copyright 2006 The Authors. Journal compilation CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd. 2006.

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Bibliographic Info

Article provided by CEIS in its journal LABOUR.

Volume (Year): 20 (2006)
Issue (Month): 4 (December)
Pages: 625-650

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Handle: RePEc:bla:labour:v:20:y:2006:i:4:p:625-650

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Cited by:
  1. Rupayan Pal & Bibhas Saha, 2010. "Entry Threats and Inefficiency in ‘Efficient Bargaining’," Working Papers id:2833, eSocialSciences.
  2. Rupayan Pal & Bibhas Saha, 2008. "Union-Oligopoly Bargaining and Entry Deterrence:A Reassessment of Limit Pricing," Working Papers id:1375, eSocialSciences.

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