Entry Threats, and Inefficiency in Ã¢â‚¬ËœEfficient BargainingÃ¢â‚¬â„¢
We examine whether the outcome of bargaining over wage and employment between an incumbent firm and a union remains efficient under entry threat. The workers\' reservation wage is not known to the entrant, and entry is profitable only against the high reservation wage. The entrant observes the pre-entry price, but not necessarily the wage agreements. When wage is not observed, contracts feature over-employment. Under separating equilibrium the low type is over-employed, and under pooling equilibrium the high type is over-employed. But when wage is observed, pooling equilibrium may not always exist, and separating equilibrium does not involve any inefficiency.
|Date of creation:||Jan 2010|
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- Rupayan Pal & Bibhas Saha, 2008.
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"The Impact of Trade Unions on Incentives to Deter Entry,"
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The RAND Corporation, vol. 19(2), pages 191-199, Summer.
- Mathias Dewatripont, 1988. "The impact of trade unions on incentives to deter entry," ULB Institutional Repository 2013/9571, ULB -- Universite Libre de Bruxelles.
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- Ohnishi, Kazuhiro, 2001. "Lifetime Employment Contract and Strategic Entry Deterrence: Cournot and Bertrand," Australian Economic Papers, Wiley Blackwell, vol. 40(1), pages 30-43, March.
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