The strategic choice of union-oligopoly bargaining agenda

This article analyzes the optimal choice of union-oligopoly bargaining agenda (i.e., Right-to-Manage versus Efficient Bargaining) under possible market entry. It is shown that agreement by both the union and the incumbent firm about Efficient Bargaining emerges as equilibrium in Nash strategies, even more so under nan-blockaded entry for deterrence motives. This is consistent with the common empirical findings that unionized firms do not behave according to the prediction of the Right-to-Manage model that employment will be on the labor demand curve. The entry deterrence effect highlighted in this paper also suggests that labor market organization should not be overlooked as a component of the welfare analysis of product market competition. (C) 1999 Elsevier Science B.V. All rights reserved.