Union's Threats and Wage Determination

Abstract

This paper considers local wage bargaining as a sequential game and focus es on how different rules of the game affect employment and equilibri um payment to workers and employers. Work-to-rule and other go-slow t hreats lead to low employment, while strike threats lead to high empl oyment. An increase in the bargaining power of the union induces high er or unchanged equilibrium employment in the strike-threat case, whi le employment is reduced in the slow-down case. Finally, if all kinds of industrial actions are legal, only one is credible. Which type de pends on the parameters of the model. Copyright 1988 by Royal Economic Society.