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Bilateral delegation in wage and employment bargaining in monopoly

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  • Chatterjee, Ishita
  • Saha, Bibhas

Abstract

We study efficiency and distributional implications of bilateral delegation in wage and employment bargaining in monopoly. Delegation causes underproduction, and the bargaining pie severely contracts rendering mutual gains from delegation impossible. With an increase in the union’s bargaining power profit may perversely rise and the union’s utility may fall.

Suggested Citation

  • Chatterjee, Ishita & Saha, Bibhas, 2013. "Bilateral delegation in wage and employment bargaining in monopoly," Economics Letters, Elsevier, vol. 120(2), pages 280-283.
    • Handle: RePEc:eee:ecolet:v:120:y:2013:i:2:p:280-283
    DOI: 10.1016/j.econlet.2013.04.009
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    References listed on IDEAS

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    1. Basu, Kaushik & Ghosh, Arghya & Ray, Tridip, 1997. "The Babu and Boxwallah: Managerial Incentives and Government Intervention in a Developing Economy," Review of Development Economics, Wiley Blackwell, vol. 1(1), pages 71-90, February.
    2. Szymanski, Stefan, 1994. "Strategic delegation with endogenous costs : A duopoly with wage bargaining," International Journal of Industrial Organization, Elsevier, vol. 12(1), pages 105-116, March.
    3. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-147, Supplemen.
    4. Ishita Chatterjee & Bibhas Saha, 2013. "Bargaining Delegation in Monopoly," Economics Discussion / Working Papers 13-09, The University of Western Australia, Department of Economics.
    5. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    6. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    7. Kaushik Basu & Tridip Ray & Arghya Ghosh, 1997. "The Babu and the Boxwallah: Managerial Incentives and Government Intervention in a Developing Economy," Review of Development Economics, Wiley Blackwell, vol. 1(1), pages 71-80, February.
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    Cited by:

    1. António Brandão & Joana Pinho, 2018. "Productivity Shocks in a Union‐Duopoly Model," Manchester School, University of Manchester, vol. 86(6), pages 722-756, December.

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    More about this item

    Keywords

    Managerial incentives; Efficient bargaining; Bilateral delegation;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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