A Disequilibrium Model under Bilateral Monopoly

Derek Leslie

Bulletin of Economic Research, 1990, vol. 42, issue 3, 155-74

Abstract: The paper points out a crucial difference between the conventional disequilibrium macro model and partial equilibrium models of wage bargaining. In the former the real wage is constrained to be less than or equal to the marginal product, whereas in the latter the real wage is frequently constrained to be greater than or equal to the marginal product. The paper builds a disequilibrium model under bilateral monopoly, paying explicit attention to the labor market. The well-known union model of McDonald and Solow forms the basis of the labor market analysis. Just as the three regions of Keynesian Unemployment, Classical Unemployment and Repressed Inflation are configured in the conventional case, an equivalent exercise is undertaken but with the addition of a collectively negotiated wage. The particular wage agreement used is the Nash bargain. Copyright 1990 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1990
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