Individual versus collective bargaining under relative income concerns

Dominique Demougin and Harvey Upton

Economics Letters, 2023, vol. 233, issue C

Abstract: We compare individual and collective bargaining when workers have relative income concerns and employment relationships are characterized by moral hazard. We show that collective bargaining internalizes externality effects that arise from other-regarding preferences. This improves firms’ abilities to create effort incentives and can therefore reduce inefficiencies associated with asymmetric information. We show that if relative income concerns are not too strong, both firms and workers strictly prefer collective bargaining.

Keywords: Relative income concerns; Moral hazard; Bargaining (search for similar items in EconPapers)
JEL-codes: D02 D82 D90 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:233:y:2023:i:c:s0165176523004056

DOI: 10.1016/j.econlet.2023.111380

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