Discussion paper

DP170 Regret and Jubilation in Union Wage Bargaining

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.


Beenstock, M (1987), “DP170 Regret and Jubilation in Union Wage Bargaining”, CEPR Press Discussion Paper No. 170. https://cepr.org/publications/dp170