The Structure of Firm-Specific Labour Unions

We apply a model with two types of labour where each group decides on whether it prefers to be represented by an independent craft-specific labour union or by a joint union. Applying the asymmetric Nash bargaining solution, we find that it is beneficial for at least one group of labourers to form its own independent union and in some cases even both groups are worse off under a joint union. Consequently, a joint union must be considered as a rather unstable institution. Correspondingly, profits are lower if the firm bargains with two independent craft unions.