Bilateral Delegation in Duopoly Wage and Employment Bargaining |
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| Authors: | Ishita Chatterjee Bibhas Saha |
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| Affiliation: | 1. Department of Economics, University of Western Australia, Crawley, Western Australia, Australia;2. Durham University Business School, University of Durham, Durham, UK |
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| Abstract: | We study bilateral delegation in wage and employment bargaining between firms and unions in a Cournot duopoly. Incentive delegation creates frictions for each party between its objectives of within‐firm rent extraction and market/job stealing from the rival firm. The net effect is restraint in production, resulting in a larger bargaining pie. But each player's payoff will be inversely related to his bargaining power. We also show that if players are given a choice to delegate, they will not resort to delegation when their bargaining power is sufficiently high. This is in contrast to the scenarios commonly assumed in many models. Copyright © 2016 John Wiley & Sons, Ltd. |
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