IDEAS home Printed from https://ideas.repec.org/a/spr/inrvec/v54y2007i1p35-52.html
   My bibliography  Save this article

Wage bargaining and vertical differentiation

Author

Listed:
  • Emanuele Bacchiega

Abstract

This article intends to apply the Nash Bargaining solution to wage setting in a vertically differentiated oligopoly and to study its welfare effects. The market outcome crucially depends on the bargaining power attributed to the agents. I show that the resulting wage bargaining structure is likely to lead to another source of distortion that adds to the classical one derived by oligopoly pricing and quality choice.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Emanuele Bacchiega, 2007. "Wage bargaining and vertical differentiation," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 54(1), pages 35-52, March.
    • Handle: RePEc:spr:inrvec:v:54:y:2007:i:1:p:35-52
    DOI: 10.1007/s12232-007-0005-6
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s12232-007-0005-6
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s12232-007-0005-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Svejnar, Jan, 1986. "Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry," Econometrica, Econometric Society, vol. 54(5), pages 1055-1078, September.
    2. Brander, James A. & Spencer, Barbara J., 1988. "Unionized oligopoly and international trade policy," Journal of International Economics, Elsevier, vol. 24(3-4), pages 217-234, May.
    3. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 551-575.
    4. Melvyn G. Coles & Andrew K. G. Hildreth, 2000. "Wage Bargaining, Inventories, and Union Legislation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(2), pages 273-293.
    5. Enrico Pennings, 2004. "Optimal Pricing And Quality Choice When Investment In Quality Is Irreversible," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 569-589, December.
    6. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    7. Webster, Allan, 1993. "The Skill and Higher Educational Content of UK Net Exports," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(2), pages 141-159, May.
    8. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
    9. Jean Gabszewicz & Alessandro Turrini, 1999. "Workers' Skills and Product Selection," Revue Économique, Programme National Persée, vol. 50(3), pages 383-391.
    10. Thomson, William, 1994. "Cooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 35, pages 1237-1284, Elsevier.
    11. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
    12. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    13. Greenaway, David & Torstensson, Johan, 2000. "Economic Geography, Comparative Advantage and Trade within Industries: Evidence from the OECD," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 260-280.
    14. Aoki, Reiko & Prusa, Thomas J., 1997. "Sequential versus simultaneous choice with endogenous quality," International Journal of Industrial Organization, Elsevier, vol. 15(1), pages 103-121, February.
    15. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    16. Clark, Kim B, 1984. "Unionization and Firm Performance: The Impact on Profits, Growth, and Productivity," American Economic Review, American Economic Association, vol. 74(5), pages 893-919, December.
    17. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-1142, December.
    18. Joan Martín-Montaner & Vicente Ríos, 2002. "Vertical specialization and intra-industry trade: The role of factor endowments," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(2), pages 340-365, June.
    19. BOCCARD, Nicolas & WAUTHY, Xavier, 2009. "Regulating quality by regulating quantity : a case against minimum quality standards," LIDAM Discussion Papers CORE 2009052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Amal Hili & Rim Lahmandi-Ayed & Hejer Lasram, 2016. "Differentiation, labor market and globalization," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(6), pages 809-833, September.
    2. Minas Vlassis & Maria Varvataki, 2014. "Union-Oligopoly Bargaining and Vertical Differentiation: Do Unions Affect Quality?," Working Papers 1409, University of Crete, Department of Economics.
    3. Amani Kahloul & Rim Lahmandi-Ayed & Hejer Lasram & Didier Laussel, 2017. "Democracy and competition: Vertical differentiation and labor in a general equilibrium model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(4), pages 860-874, August.
    4. Hend Ghazzai & Wided Hemissi & Rim Lahmandi-Ayed & Sana Mami Kefi, 2021. "Note on Democracy and Competition: The Role of Ownership Structure in a General Equilibrium Model with Vertical Preferences," Revue d'économie politique, Dalloz, vol. 131(2), pages 249-261.
    5. Emanuele Bacchiega & Antonio Minniti, 2015. "Training and Product Quality in Unionized Oligopolies," Economica, London School of Economics and Political Science, vol. 82, pages 1261-1301, December.
    6. António Brandão & Joana Pinho, 2018. "Productivity Shocks in a Union‐Duopoly Model," Manchester School, University of Manchester, vol. 86(6), pages 722-756, December.
    7. Bacchiega, Emanuele & Randon, Emanuela & Zirulia, Lorenzo, 2012. "Strategic accessibility competition," Research in Economics, Elsevier, vol. 66(2), pages 195-212.
    8. Hend Ghazzai & Wided Hemissi & Rim Lahmandi-Ayed & Sana Kefi, 2020. "A Note on Democracy and Competition: The Role of Ownership Structure in a General Equilibrium Model with Vertical Preferences," Working Papers hal-02480175, HAL.
    9. BACCHIEGA, Emanuele, 2004. "Vertical differentiation, wage bargaining and intra-industry trade liberalization," LIDAM Discussion Papers CORE 2004028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    10. Minas Vlassis & Maria Varvataki, 2014. "Union-Oligopoly Bargaining and Vertical Differentiation: Do Unions Affect Quality? Dynamic Analysis," Working Papers 1410, University of Crete, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. BACCHIEGA, Emanuele, 2004. "Vertical differentiation, wage bargaining and intra-industry trade liberalization," LIDAM Discussion Papers CORE 2004028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Emanuele Bacchiega & Antonio Minniti, 2015. "Training and Product Quality in Unionized Oligopolies," Economica, London School of Economics and Political Science, vol. 82, pages 1261-1301, December.
    3. António Brandão & Joana Pinho, 2018. "Productivity Shocks in a Union‐Duopoly Model," Manchester School, University of Manchester, vol. 86(6), pages 722-756, December.
    4. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2019. "The Decomposability of the Nash Bargaining Solution in Labor Markets," Working Papers CIE 128, Paderborn University, CIE Center for International Economics.
    5. Pierre-André Chiappori & Olivier Donni, 2005. "Learning From a Piece of Pie: The Empirical Content of Nash Bargaining," THEMA Working Papers 2006-07, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    6. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2020. "Wage Bargaining and Employment Revisited: Separability and Efficiency in Collective Bargaining," CESifo Working Paper Series 8422, CESifo.
    7. Paul Heidhues, 2000. "Employers’ Associations, Industry-wide Unions, and Competition," CIG Working Papers FS IV 00-11, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    8. Gabszewicz, J. & Turrini, A., 2000. "Workers' skills, product quality and industry equilibrium," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 575-593, May.
    9. Dube Arindrajit & Reddy Sanjay G., 2014. "Threat Effects and Trade: Wage Discipline through Product Market Competition," Journal of Globalization and Development, De Gruyter, vol. 4(2), pages 213-252, March.
    10. Peter W. Wright & Paulo Bastos, 2012. "Exchange Rates and Wages in Unionized Labor Markets," ILR Review, Cornell University, ILR School, vol. 65(4), pages 975-999, October.
    11. Harbaugh, Rick, 2005. "The effect of employee stock ownership on wage and employment bargaining," Journal of Comparative Economics, Elsevier, vol. 33(3), pages 565-583, September.
    12. l'Haridon, Olivier & Malherbet, Franck & Pérez-Duarte, Sébastien, 2013. "Does bargaining matter in the small firms matching model?," Labour Economics, Elsevier, vol. 21(C), pages 42-58.
    13. Lommerud, Kjell Erik & Meland, Frode & Rune Straume, Odd, 2006. "Globalisation and union opposition to technological change," Journal of International Economics, Elsevier, vol. 68(1), pages 1-23, January.
    14. Tamini, Lota D., 2012. "Optimal quality choice under uncertainty on market development," MPRA Paper 40845, University Library of Munich, Germany.
    15. repec:cdl:ucsbec:10-00 is not listed on IDEAS
    16. Kjell Erik Lommerud & Frode Meland & Lars S¯rgard, 2003. "Unionised Oligopoly, Trade Liberalisation and Location Choice," Economic Journal, Royal Economic Society, vol. 113(490), pages 782-800, October.
    17. Wei Ding, 2015. "Decentralized union-oligopoly bargaining when wages signal strength," Journal of Economics, Springer, vol. 114(3), pages 239-254, April.
    18. Lommerud, Kjell Erik & Straume, Odd Rune & Sørgard, Lars, 2000. "Merger Profitability in Unionized Oligopoly," University of California at Santa Barbara, Economics Working Paper Series qt9736w3k9, Department of Economics, UC Santa Barbara.
    19. Jean Gabszewicz & Alessandro Turrini, 1999. "Workers' Skills and Product Selection," Revue Économique, Programme National Persée, vol. 50(3), pages 383-391.
    20. Kjell Erik Lommerud & Odd Rune Straume & Lars Sørgard, 2006. "National versus international mergers in unionized oligopoly," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 212-233, March.
    21. Yoshio Kamijo & Koji Yokote, 2022. "Behavioral bargaining theory: Equality bias, risk attitude, and reference-dependent utility," Working Papers 2208, Waseda University, Faculty of Political Science and Economics.

    More about this item

    Keywords

    vertical differentiation; worker’ skills; wage bargaining; welfare;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • J00 - Labor and Demographic Economics - - General - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:inrvec:v:54:y:2007:i:1:p:35-52. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.