The Effect of Regulation on Collective Bargaining in Electric Utilities

Wallace Hendricks

Bell Journal of Economics, 1975, vol. 6, issue 2, 451-465

Abstract: Most of the recent work on the effect of regulation on the behavior of the firm has focused on the investment decisions of the firm. Very little work has been done on other aspects of the firm's behavior. This paper investigates the optimal behavior of a regulated firm faced with a wage demand by a union. It is shown that the optimal offer of the firm depends on the type of regulation imposed. This analysis suggests several hypotheses which are tested with data on union wage levels in electric utilities. The empirical results indicate that wages are higher in low profit firms than in high profit firms. These results are consistent with a model of regulation in which few firms face an upper boundary on their profit levels.

Date: 1975
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