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Durham University

Research & business

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Publication details

Chatterjee, I. & Saha, B. (2017). Bilateral delegation in duopoly wage and employment bargaining. Managerial and Decision Economics 38(4): 607-621.

Author(s) from Durham

Abstract

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.