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Wage Bargaining with a Price-Making Firm Right-to-Manage and Efficient Bargaining

Author

Listed:
  • Christian ARNSPERGER

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

  • David DE LA CROIX

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

This paper examines the introduction of monopolistic competition into wage bargaining models : in addition to capital-labour substitution, we also consider a cost-push effect. The right-to-manage model requires strong restrictions on the objective functions and leads to problematic conclusions because the wage claims of the union are generally not compatible with the mark-up requirement contained in the firm’s price equation. In the efficient bargaining model, the union negotiates also the employment level, which gives it a way of extracting part of the monopoly rent : the firm’s commitment to an efficient wage-employment combination forces it to follow a pricing rule such that part of the surplus is transferred to the union.

Suggested Citation

  • Christian ARNSPERGER & David DE LA CROIX, 1990. "Wage Bargaining with a Price-Making Firm Right-to-Manage and Efficient Bargaining," LIDAM Discussion Papers IRES 1990007, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1990007
    as

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