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Bilateral Delegation in Duopoly Wage and Employment Bargaining
Author(s) -
Chatterjee Ishita,
Saha Bibhas
Publication year - 2017
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2807
Subject(s) - wage bargaining , delegation , duopoly , bargaining power , cournot competition , delegate , economics , microeconomics , wage , incentive , bargaining problem , labour economics , management , computer science , programming language
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.