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Wage Bargaining under the National Labor Relations Act

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  • Quan Wen
  • Jesse A. Schwartz
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Abstract

Sections 8(a)(3) and 8(a)(5) of the National Labor Relations Act prevent a firm from unilaterally increasing the wage it pays the union during the negotiation of a new wage contract. To understand this regulation, we study a counterfactual negotiation model where the firm can temporarily increase compensation to its employees during wage negotiations. Comparing this to the case where the firm does not have this option, we show that the firm may strategically increase the union's temporary wage to upset the union's incentive to strike, decreasing the union's bargaining power, and shrinking the set of permanent wage contracts that may arise in a perfect equilibrium. As the union becomes more patient, the best possible equilibrium contract to the union gets worse. In the limit, the uniqueness and hence the full efficiency of the perfect equilibrium are restored. We also demonstrate that allowing the union to refuse the firm's temporary compensation does not affect the set of perfect equilibrium outcomes

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 554.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:feam04:554

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Keywords: Bargaining; Negotiation; Good Faith Bargaining;

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  1. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475.
  2. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
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