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Wage versus efficient bargaining in oligopoly

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Author Info
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.

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File URL: http://hdl.handle.net/10.1002/mde.1277
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Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 27 (2006)
Issue (Month): 7 ()
Pages: 595-604
Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Handle: RePEc:wly:mgtdec:v:27:y:2006:i:7:p:595-604

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Bughin, J., 1995. "Unions and strategic managerial incentives," Economics Letters, Elsevier, vol. 47(1), pages 95-100, January. [Downloadable!] (restricted)
  2. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S40-S87, June. [Downloadable!] (restricted)
    Other versions:
  3. Kraft, Kornelius, 1998. "The codetermined firm in oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 195-201, November. [Downloadable!] (restricted)
  4. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December. [Downloadable!] (restricted)
  5. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August. [Downloadable!] (restricted)
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  6. Bensaid, Bernard & Gary-Bobo, Robert J., 1991. "Negotiation of profit-sharing contracts in industry," European Economic Review, Elsevier, vol. 35(5), pages 1069-1085, July. [Downloadable!] (restricted)
  7. Hoel, Michael, 1990. " Local versus Central Wage Bargaining with Endogenous Investments," Scandinavian Journal of Economics, Blackwell Publishing, vol. 92(3), pages 453-69.
  8. Stewart, Geoff, 1989. "Profit-sharing in cournot oligopoly," Economics Letters, Elsevier, vol. 31(3), pages 221-224, December. [Downloadable!] (restricted)
  9. Dixon, Huw David, 1988. "Unions, Oligopoly and the Natural Range of Employment," Economic Journal, Royal Economic Society, vol. 98(393), pages 1127-47, December. [Downloadable!] (restricted)
  10. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn. [Downloadable!] (restricted)
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