Profit-Sharing: Does It Reduce Bargaining Inefficiencies ?

Vincent J. Vannetelbosch
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Vincent J. Vannetelbosch: UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES); UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)

No 1997009, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: Within an incomplete information framework, we develop a model of wage determination in a unionized Cournot oligopoly. The assumption of incomplete information allows the possibility of strikes, which waste industry potential ressources, at equilibrium. Facing such deadweight loss, the government or the social planner may decide to adopt a policy, like a profit-sharing scheme. Under two different bargaining structures (firm-level vs industry-level), we investigate the effects of adopting profit-sharing on the wage outcome and the bargaining inefficiencies, like strikes. Our main results are as follows. If the base wage bargaining takes place at the industry-level, then the introduction of a profit-sharing scheme increases the bargaining inefficiencies. But if the base wage bargaining takes place at the firm-level and the number of firms in the industry is greater than two, then the introduction of a profit-sharing scheme reduces the bargaining inefficiencies.

Keywords: Wage bargaining; profit-sharing; incomplete information; strikes (search for similar items in EconPapers)
JEL-codes: C78 J50 (search for similar items in EconPapers)
Pages: 17
Date: 1997-06-01
New Economics Papers: this item is included in nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1997009

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