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Collective Bargaining under Non-Binding Contracts

Author

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  • Dobbelaere, Sabien

    (Vrije Universiteit Amsterdam)

  • Luttens, Roland Iwan

    (University of Amsterdam)

Abstract

We introduce collective bargaining in a static framework where the firm and its risk-neutral employees negotiate over wages in a non-binding contract setting. Our main result is the equivalence between the non-binding collective equilibrium wage-employment contract and the equilibrium contract under binding risk-neutral efficient bargaining. We also demonstrate that our non-cooperative equilibrium wages and profits coincide with the Owen values of the corresponding cooperative game with the coalitional structure that follows from unionization.

Suggested Citation

  • Dobbelaere, Sabien & Luttens, Roland Iwan, 2011. "Collective Bargaining under Non-Binding Contracts," IZA Discussion Papers 5518, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp5518
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    References listed on IDEAS

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    Cited by:

    1. Montez, João, 2014. "One-to-many bargaining when pairwise agreements are non-renegotiable," Journal of Economic Theory, Elsevier, vol. 152(C), pages 249-265.

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    More about this item

    Keywords

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    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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