The Bargaining–sales‐delegation Game

This article revisits the managerial delegation literature led by Vickers ( 1985 ), Fershtman and Judd ( 1987 ) and Sklivas ( 1987 ) by introducing a bargaining mechanism between owners and managers over managerial contracts. It shows that the degree of bargaining interacts with the extent of product differentiation in determining whether the sub‐game perfect Nash equilibrium is sales delegation or profit maximisation. In contrast with the classical result, no sales delegation emerges and the typical prisoner's dilemma of the managerial delegation literature is solved. This holds in both contexts of Cournot and Bertrand rivalries. The article also provides results for the more general cases with heterogeneous managerial bargaining power and endogenous decisions of the owners regarding the bargaining power of the manager that should be or not be hired in a firm. Copyright © 2016 John Wiley & Sons, Ltd.     

The collective bargaining of flexicurity: A case for sector‐level analysis? The Italian chemical and metalworking sectors compared

Although employment relations in Europe have long been seen as a factor of rigidity, limiting managerial discretion and adaptability, in the last 30 years, they have witnessed a trend towards decentralisation of collective bargaining and negotiations increasingly centred on flexibility–security trade‐offs between employers and employees. Research on the contribution of collective bargaining to the so‐called flexicurity has mostly focused on national‐level institutional arrangements. In this article, we contend that meso‐level differences need to feature more prominently in the debate. Our comparison of two sectors in the same country (chemicals and metalworking in Italy) shows that decentralisation has divergent effects on flexicurity issues depending in particular on differences in market structures and on depth of bargaining. The interplay between these two factors affects what we refer to as procedural security, which we view as important in ensuring sustainable trade‐offs between flexibility and security.     

Price versus Quantity in a Duopolistic Market with Bargaining over Managerial Delegation Contracts

This paper studies the endogenous choices of strategic contracts in a duopoly with bargaining between the owner and manager of each firm over the content of the managerial delegation contract. We show that when the bargaining power of the manager relative to that of the owner within each firm is sufficiently high, quantity competition based on the quantity contracts chosen by the owners of both firms can be uniquely observed in the equilibrium, whereas quantity competition and price competition can be observed in the equilibrium when this relative bargaining power is sufficiently low. Copyright © 2015 John Wiley & Sons, Ltd.     

Faculty bargaining in private colleges and universities: Beyond Yeshiva

In 1980, the U.S. Supreme court inYeshiva University v. NLRB ruled that faculty members in some private colleges and universities are managerial employees, and, thus, are not entitled to the protection provided under federal labor law. Since then, the courts and the National Labor Relations Board have heard a number of cases arising out ofYeshiva. This article first reviews the status of managerial and professional employees under the NLRA, then examines how the law has been applied in the aftermath ofYeshiva. We conclude that while a few general principles have evolved, the courts have yet to establish clear criteria for defining “managerial” as applied to university faculty. We note that theYeshiva case has resulted in a substantive decline in collective bargaining among faculty in private sector higher educational institutions, and that the criteria arising out of the decision have the potential for restricting collective bargaining coverage outside academia.     

Bilateral Delegation in Duopoly Wage and Employment Bargaining

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.     

The effects of bargaining power on trade credit in a supply network

We develop a multi-tier supply network model, rooted in social network theory, to evaluate the effect of bargaining power on trade credit and to track the effect of buyers' trade credit on suppliers' trade credit. We apply social network analysis to measure companies' bargaining power in the supply network of Hennes & Mauritz AB (H&M, the Swedish clothing retailer). The results show that the buyer's bargaining power significantly affects the choice of trade credit, and that the supplier's “upstreamness” is significantly associated with its trade credit. We find limited evidence to support the notion of a financial bullwhip effect, a result that merits further research, since this study is limited to the network of one company up to its fourth tier of suppliers in one financial year. Our results can be applied by companies seeking to control their cash flow and, therefore, the financial pressure within their supply network. This study contributes to the literature by bringing social network measures into the buyer–supplier financial flow, as well as offering one of the first empirical examinations of the propagation of financial pressure in a multi-tier supply network.     

A real options approach to valuing and negotiating licensing agreements

We apply real options modeling to a common pharmaceutical industry licensing arrangement to take into account various uncertainties and the flexibility value. The managerial flexibility is limited to the project abandonment option. We extend previous work by incorporating the phases required to bring the project from patent approval to market. We also incorporate a deterministic variable into the cash flow process that provides a realistic product lifecycle. We focus on the allocation of project value between licensor and licensee, i.e., the so-called “profit split” ratio (PSR) because it is commonly used in practice to negotiate terms. We find: (1) Ignoring the managerial flexibility in valuation may cause the licensee to either forego an acceptable deal or enter into an inferior deal. (2) The magnitude of project profitability as well as cost and sales uncertainty affects the licensor's bargaining power over compensation for granting abandonment flexibility to the licensee. (3) Managers must exercise care when estimating sales volatility because the flexibility value is more sensitive to sales volatility than it is to cost volatility. (4) Failure to incorporate the product lifecycle will produce suboptimal capital investment decisions.     

Private Information and Bargaining Power in Venture Capital Financing

We model the natural evolution of private information over the life of a venture capitalist financed project. In the early stages, the entrepreneur is better informed regarding the project, and when the project matures, the venture capitalist has an informational advantage over the entrepreneur. Within this framework, we examine how the venture capitalist's relative bargaining power affects cash flow rights and investment. When the bargaining advantage lies with the entrepreneur, the project may not be screened, and the venture capitalist may acquiesce to excessive initial investment but subsequently terminate the project. Increased venture capitalist bargaining power encourages project screening, attenuates the incentive to overinvest, and reduces the incidence of project termination subsequent to the initial investment. The payoff sensitivity of venture capitalist's financing contract also increases as his bargaining power improves.     

Bargaining power in alliance governance negotiations: evidence from the biotechnology industry

Alliance partners negotiate how they will govern their alliance. This study shows bargaining power, not just efficiency considerations, influences the outcome of this negotiation. Whereas previous research on this phenomenon associates bargaining power with firm size, this study employs more nuanced measures of bargaining power applicable to biotechnology firms while controlling both absolute and relative firm size. We find small biotechnology firms with partners that are over five times larger can still have the bargaining power to get their interests met when the two parties have opposing governance interests.     

Efficient Delegation by an Informed Principal

Motivated by examples from the automobile industry, insurance, retailing, and multinational strategy, we study an organizational structure we refer to as "partial delegation." In a bargaining problem between an informed party and an uninformed party, partial delegation involves the informed party delegating bargaining to an agent while retaining control of its private information. We show that partial delegation enables the informed party to earn information rents without creating quantity distortions. First‐best quantities are traded in equilibrium. We argue that partial delegation allows an informed party to implement efficient trade with outside parties by endogenously improving its bargaining power.     

Bargaining When Exchange Affects the Value of Future Trade

We examine bargaining in a dynamic context where exchange between two parties affects the potential surplus from future trade. In this setting traders negotiate current contracts anticipating the impact of their agreement on future exchanges. We show that in growing environments these dynamic considerations will often ameliorate bargaining inefficiencies associated with private information and facilitate exchange as both parties cooperate to nurture the relationship. In contrast, we find that in declining environments dynamic considerations will often exacerbate bargaining inefficiencies and hinder trade, as both parties are hesitant to let the relationship mature. These findings have implications for preferences to form long-lived relationships.     

Bargaining over managerial contracts in delegation games: managerial power,contract disclosure and cartel behavior

Modern corporate governance codes include clauses requiring the disclosure of managerial compensation. Such codes have been installed to protect shareholders' interests. In this paper, we explore the impact of such disclosure on consumer welfare. We consider two‐stage delegation games in which owner‐shareholders negotiate about compensation with their managers in the game's first stage. At the end of the first stage, the managerial compensation contract outcomes of the bargaining process are publicly announced. In the second stage, Cournot competition evolves. We prove that sales delegation generates equilibria radically different from relative performance delegation. Using classical Cournot as the benchmark, contractual bargaining over sales compensation gives tougher product market competition—and hence higher consumer surplus. The opposite holds true for relative performance delegation. Then, cartel behavior is promoted, reducing consumer surplus. Copyright © 2007 John Wiley & Sons, Ltd.     

Strategic trade policy with bargaining over managerial contracts

This paper re‐examines the well‐known activist regime's inefficiency (governments set export subsidies) in a sales–delegation game with owner–manager bargaining over contracts. Contrary to the received literature, this bargaining process may (a) induce governments to set a tax if products are not too substitute or complements and (b) lead to an efficient (inefficient) equilibrium provided that products are sufficiently differentiated (not too complements). Therefore, unilateral public intervention can be optimal: in case of rival governments' retaliation, under appropriate product competition degrees, welfares are larger than under free trade even for small managers' power. Thus, managerial delegation practices are crucial also for international trade issues.     

Trade Unions and the Reform of the Quality of Work Life: Ergonomic and Other QWL Reforms Have Limited Goals and Are Held No Substitute for Labor Involvement

Abstract . North American labor unions have typically responded to management- initiated Quality of Work Life (QWL) reforms: by co operating in their design and implementation, or by rejecting involvement and relying on traditional collective bargaining. Neither response addresses the distribution of organizational power. Workplace reform in North America confines itself to the technical aspects of job design. Traditional collective bargaining, however, tends to be highly circumscribed, focusing on pay and fringe benefits. To be meaningful, workplace reform must take place within a context of changing power relations between unions and managements Otherwise it may be overwhelmed by events occurring in the external environment. Labor unions, therefore, need to participate in QWL initiatives while simultaneously making new types of demands at the bargaining table, and seeking input into strategic decisions.     

Endogenous scope of bargaining in a union–oligopoly model: when will firms and unions bargain over employment?

The scope of firm–union bargaining is shown to be endogenously determined in a union–oligopoly model with decentralized negotiations. If the unions' power is sufficiently high, all bargaining units choose to negotiate over wages alone, i.e., universal right-to-manage bargaining emerges in equilibrium. Otherwise, wage/employment bargaining and right-to-manage bargaining coexist in the same industry. In equilibrium, some firm–union pairs will always choose to bargain over employment as well, since the firms become Stackelberg leaders in the market by committing to a particular output during the negotiations. The firms and their unions both benefit from the additional Stackelberg rents, provided that the unions' power is small enough. Our analysis suggests that there is not necessarily a negative relationship between unions' power and sectoral employment rates.     

Bargaining with Transnational Corporations: The Case of Shanghai

This study addresses the power relationship between TNCs and their partners in the host region, a question that critically affects regional development in this globalizing world. Site interviews suggest Shanghai’s special standing in China, providing it with stronger power in bargaining with TNCs than any other region in the country. Shanghai has thus gained tremendous benefits in technology transfer and managerial skill improvement. Company studies further reveal that the bargaining relationship between TNCs and local companies differs according to many factors. The level of ownership is determined by competition between both sides in terms of capital strength, technology level and marketing capability. The level of localization is affected by the previous status of the local partner, the size and development of the domestic market and the capability of the local manager. The change of one region’s bargaining power is also related to the power of other (potential) competition regions. The degree of regional economic imbalance between regions within a country tends to be enlarging in the process of global-local interaction mediated by TNCs. — Cette étude concerne les relations de pouvoir entre les entreprises transnationales et leurs partenaires dans la région d’accueil, une question qui affecte de façon critique le développement régional dans un monde qui se globalise. Shangaï a une position spéciale en Chine qui lui donne plus de pouvoirs que n’importe quelle autre région du pays pour négocier avec les entreprises transnationales. Shangaï a donc acquis des avantages importants dans le transfert des technologies et dans le perfectionnement des compétences des cadres. Les études de firmes révèlent que les relations dans les négociations entre les entreprises transnationales et les entreprises locales changent selon de nombreux facteurs. Le niveau de propriété est déterminé par la compétition entre les deux parties quant au pouvoir du capital, au niveau technologique et à la capacité de commercialisation. Le changement des pouvoirs de négociation d’une région est aussi lié au pouvoir des autres régions qui pourraient lui faire concurrence. Le niveau de déséquilibre économique régional entre les régions d’un pays tend à s’accentuer dans le processus d’interaction local-global dont les entreprises transnationales sont le médiateur.     

Skill development,bargaining power,and a theory of job design

We examine the job design decision in the context of skill development and bargaining power. The choice between specialization and multitasking requires employees to develop either specialized or varied task‐specific skills. Employees' (i.e., the owners of the acquired skills) bargaining power depends on their skill sets, which differentiate their ability to hold up production and threaten to leave a firm. When a firm cannot meaningfully elicit skill investments through job design, it will pursue inefficient multitasking to reduce production holdups or inefficient specialization to prevent skilled employees from leaving. We obtain inefficient job design results only for mediocre ability workers.     

Strategic militancy and the probability of strikes in union-firm bargaining

The paper provides a model that explains the probability of strikes by the union's use of militancy as a strategic tool in bargaining. Militants are useful because they provide a credible threat, hence enhancing the union's bargaining position. Using a multi-stage bargaining game, we show that, in general, militants will be used by the union as a strategic tool. The strategic benefit of militancy is reflected by the fact that the wage and employment level will be higher in a union that uses militants, compared to a union that does not. We use the model to show that the level of militancy and the probability of a strike decrease with the union's power. This suggests that policies that increase the strength of the union will have, at least, a partial positive effect on social welfare. We also show that the model can be viewed as providing an equilibrium of a repeated game, an interpretation that can explain the probability of strikes even in the absence of militants.     

Manager‐Union Bargaining Agenda Under Monopoly and with Network Effects

This paper investigates the bargaining agenda selection in a unionised monopoly with managerial delegation (MD). In contrast to the conventional wisdom, monopoly profits with MD under sequential Efficient Bargaining (SEB) exceed those under Right‐to‐Manage (RTM), while the union can prefer RTM to SEB: paradoxically, a conflict of interests between the parties may still exist but for reversed choices of the agenda. Consumption externalities change the picture. The monopolist still prefers SEB; however, provided that network effects are sufficiently strong, the union prefers SEB even for a relatively low bargaining power. Thus, the parties endogenously choose the SEB agenda which is also Pareto‐superior. Copyright © 2016 John Wiley & Sons, Ltd.     

The changing structure of industrial relations in South Africa

This is the second of two papers dealing tvith the emergence of black shop-floor union power and the changing structure of industrial relations in South Africa. This paper examines union developments in the post-Wiehahn era, The policies of the major union federations and the impact of the black unions' emphasis on shop-floor bargaining. It is clear that the established unions, the State and individual company managements have been significantly affected by this development. The main issue in the near future is seen to be the dividing-line between managerial prerogatives and worker-participation.