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Job security, wage bargaining and duopoly outcomes

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  • Sudipa Majumdar
  • Bibhas Saha

Abstract

This paper develops a model where labour supply is constrained because training new workers is costly and redundant workers cannot be fired. An entrant draws labour from an incumbent firm through a wage contest while wages in the latter are bargained with its unionized workers. In a Cournot equilibrium, the union's bargaining power has a positive effect on the incumbent's output, but a negative effect on the industry output. Social welfare under duopoly may fall short of the monopoly level. The distribution of bargaining gains within the incumbent firm is sensitive to whether wage and output choices are made sequentially or simultaneously.

Suggested Citation

  • Sudipa Majumdar & Bibhas Saha, 1998. "Job security, wage bargaining and duopoly outcomes," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(4), pages 389-403.
    • Handle: RePEc:taf:jitecd:v:7:y:1998:i:4:p:389-403
    DOI: 10.1080/09638199800000022
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    References listed on IDEAS

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    1. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 699-726.
    2. Fallon, Peter R. & Lucas, Robert E. B., 1993. "Job security regulations and the dynamic demand for industrial labor in India and Zimbabwe," Journal of Development Economics, Elsevier, vol. 40(2), pages 241-275, April.
    3. Hogan, Seamus & Ragan, Christopher, 1995. "Employment Adjustment versus Hours Adjustment: Is Job Security Desirable?," Economica, London School of Economics and Political Science, vol. 62(248), pages 495-505, November.
    4. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-1142, December.
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    Cited by:

    1. Carlo Capuano & Iacopo Grassi, 2019. "Upward-sloping labor supply, firing costs and collusion," Economics Bulletin, AccessEcon, vol. 39(1), pages 502-512.
    2. Rupayan Pal & Bibhas Saha, 2008. "Union-oligopoly bargaining and entry deterrence: a reassessment of limit pricing," Journal of Economics, Springer, vol. 95(2), pages 121-147, November.
    3. Carlo Capuano & Iacopo Grassi, 2018. "Endogenous input price and collusion sustainability in the output market," Economics Bulletin, AccessEcon, vol. 38(2), pages 844-851.

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