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

Luciano Fanti

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

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.

Keywords: Efficient bargaining; Monopoly union; Right-to-manage; Cournot duopoly. (search for similar items in EconPapers)
JEL-codes: J51 L13 (search for similar items in EconPapers)
Date: 2011-01-11
Note: ISSN 2039-1854
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2011/131

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