DP170 Regret and Jubilation in Union Wage Bargaining
|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.