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.