Monopolistic Firms Gain Bargaining Power, Unions Lose Leverage in Wage Negotiations
The article explores how wage bargaining changes when a company has market power. Two models are considered: one where the company sets prices and one where the union negotiates both wages and employment levels. In the first model, the union's wage demands may clash with the company's pricing strategy. In the second model, the union can extract some of the company's profits by negotiating both wages and jobs. This forces the company to share some of its profits with the union.