A bargaining game in a partially unionized firm with monopolistic power

Abstract

The present paper develops an equilibrium model of a partially unionized firm that is a monopolist in
product market. The firm - union bargaining follows the efficient bargaining process. They bargain
simultaneously over the employment level and the unionized wage taking the non-unionized labor
employed by the firm as given, while the agent takes the bargaining process as given and chooses the
quantity of labor which maximizes his profits. We use the model to examine the comparative statics
effects of the unions bargaining power, the "competitive" wage paid to the non-unionized workers and the
union's orientation on the bargained wage and the employment level. Applying a Nash cooperative
bargaing process we found that the effect of a change in the competitive wage and the increase in the wage
elasticity of the union will be posistive both on equilibrium wage and employment. The effect, however, of
a change in the bargaining power of the firm, will be positive for the wage rate but for the employment
depends on whether the union is wage or employment-oriented.