DP987 Wage Bargaining in Industries with Market Power

Author(s): Samuel Bentolila, Juan J. Dolado, Atilano Jorge Padilla
Publication Date: July 1994
Keyword(s): Bargaining, Strategic Complementarity, Strategic Substitutability, Wages
JEL(s): D4, J30, J51
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=987

In this paper we develop a fully game-theoretic version of the right-to-manage model of firm-level bargaining where strategic interactions among firms are explicitly recognized. Our main aim is to investigate how equilibrium wages and employment react to changes in the labour and product markets, the business cycle and economic policy. We show that our comparative statics results hinge crucially on the strategic nature of the game, which in turn is determined by the relative bargaining power of unions and managers.