Many unions in the United States have for several years engaged in what is known as pattern bargaining. In this article, we show that pattern bargaining is preferred by a union to both simultaneous industry-wide negotiations and sequential negotiations without a pattern. Allowing for interfirm productivity differentials within an industry, we show that for small differentials, the union most prefers a pattern in wages, but for a sufficiently wide differential, the union prefers a pattern in labor costs. Finally, we demonstrate that pattern bargaining can be a significant entry deterrent. This provides an explanation for why incumbent firms in an industry may support the use of pattern bargaining in labor negotiations. Copyright 2004 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.
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Volume (Year): 45 (2004)
Issue (Month): 1 (02)
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- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- Henrick Horn & Asher Wolinsky, 1988.
"Bilateral Monopolies and Incentives for Merger,"
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The RAND Corporation, vol. 19(3), pages 408-419, Autumn.
- Daniel Diermeier & Roger B. Myerson, 1994. "Bargaining," Discussion Papers 1089, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kathryn J. Ready, 1990. "Is Pattern Bargaining Dead?," ILR Review, Cornell University, ILR School, vol. 43(2), pages 272-279, January.
- Dobson, Paul W., 1994. "Multifirm unions and the incentive to adopt pattern bargaining in oligopoly," European Economic Review, Elsevier, vol. 38(1), pages 87-100, January.
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