On centralized bargaining in a symmetric oligopolistic industry

Abstract

In this paper we study interactions between labor and product markets, in an imperfectly competitive industry with centralized wage bargaining. Firms jointly bargain with the union over wages and then compete in prices or quantities. We show that the negotiated wage is independent of the number of firms, the degree of substitutability of firms' products, and the type of market competition, in a broad c1ass of industry specifications, including the standard syrnmetric linear demand system-linear one factor (labor) technology. This result is robust to various union objectives. Thus, unions are better-off as the market becomes more competitive because aggregate! employment increases. Finally,. motivated by the wage independence property, we propose that the bargained wage in a Bertrand homogenous market be taken as the limit of that of a differentiated market as the degree of substitutability goes to one.