Unions and Firms Restrain Production to Increase Bargaining Pie
The article explores how firms and unions negotiate wages and employment in a competitive market. Delegating decision-making power can lead to more cautious behavior, resulting in larger benefits for both sides. However, the payoff for each party depends on their bargaining power. Interestingly, when players have strong bargaining power, they are less likely to delegate. This finding challenges common assumptions in similar models.