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When an efficient bargaining is more "efficient" than a competitive labour market

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  • Luciano Fanti

Abstract

We consider a unionised duopoly with efficient bargaining at the firm level (i.e. negotiations both on wage and employment). We show that if the target of unions is the total wage bill, then, as expected, consumer surplus and social welfare are the same of when the labour market is "competitive", that is the efficient bargaining institution preserves "efficiency". By contrast, if the trade union is wage (employment) oriented (or, according to an alternative interpretation, unionised workers are risk-averse (risk-neutral)) then both the consumers and social welfare are lower (higher) than those under competitive labour market. The interesting conclusion is that if unions are more employmentoriented (workers are risk-averse) then unionisation is preferred to a "competitive" labour market by consumers and by society as a whole.

Suggested Citation

  • Luciano Fanti, 2011. "When an efficient bargaining is more "efficient" than a competitive labour market," Discussion Papers 2011/131, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
  • Handle: RePEc:pie:dsedps:2011/131
    Note: ISSN 2039-1854
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    File URL: https://www.ec.unipi.it/documents/Ricerca/papers/2011-131.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Efficient bargaining; Monopoly union; Right-to-manage; Cournot duopoly.;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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