Voting, bargaining, and factor income distribution

The effect of possible price control on factor income distribution under a democratic system is examined in the context of a collective bargaining model. A solution concept of the cooperative game theory called the Harsanyi-Shapley value is chosen to predict a likely outcome. The explicit solution for a non-atomic production economy, with two production factors and a fixed coefficient technology, is obtained. We find that this solution can be realized through prices. It is observed that in this solution, factor income shares respond to the ratio of the total endowments of two factors.