Inventories and wage bargaining

A union is assumed to make a sequence of ''take it or leave it'' wage demands to a firm which produces a storable good. Equilibrium has the following properties: 1. The firm chooses to accumulate inventories even though there is no uncertainty. 2. The accumulation of inventories lowers wages by reducing the rents from further production and therefore harms the union without benefitting the firm. 3. There can be intermittent work stoppages (i.e., strikes) even though there is no uncertainty. These work stoppages limit the firm's inventories and hence raise wages. (C) 1997 Academic Press.