DP170 Regret and Jubilation in Union Wage Bargaining
| Author(s): | Michael Beenstock |
| Publication Date: | March 1987 |
| Keyword(s): | Collective Bargaining, Jubilation Effect, Labour Markets, Regret Effects, Unions, Utilitarian Assumption, Wages |
| JEL(s): | 026, 824, 831, 832 |
| Programme Areas: | International Macroeconomics |
| Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=170 |
A theoretical model of collective wage bargaining is developed in which unions set wages and employers decide employment. A novel feature of the model is that the conventional expected utility calculus is replaced by one in which regret from failed wage bargains and jubilation from successful ones influence decision-making under uncertainty. This gives rise to a series of wage bargaining rounds in which collectively determined wage rates rise and employment falls. This dynamic behaviour is not implied by conventional analyses.