Is Wage-Leadership an Instrument to Coordinate Union's Wage-Policy? The Case of Imperfect Product Markets

Thomas Grandner ()
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Thomas Grandner: Department of Economics, Vienna University of Economics & B.A.

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: Given an oligopolistic product market, trade unions organized at firm level want to coordinate their wage bargaining activities, even if they are self interested. In this paper a situation is analysed, where for some exogenous reasons a complete centralization is not possible. Unions could try to coordinate wage-setting by ''wage leadership''. The outcome of such ''wage leadership'' is compared with the outcome of an uncoordinated bargaining and results in higher utilities for all unions. But the resulting wages and employment levels are not symmetrically neither for the unions nor for firms. Employment levels will change in different directions. In the ''wage leader'' firm employment falls and in the ''follower'' firm employment rises compared to an uncoordinated wage bargaining. This may cause problems with the implementation of ''wage leadership''

Date: 1996-11
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