Union-oligopoly bargaining and entry deterrence: a reassessment of limit pricing

Pal, Rupayan and Saha, Bibhas (2008) Union-oligopoly bargaining and entry deterrence: a reassessment of limit pricing. Journal of Economics, 95 (2). pp. 121-147. ISSN 0931-8658

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Abstract

This paper introduces wage bargaining in the framework of Milgrom and Roberts (Econometrica 50(2):443–459, 1982) where the workers’ reservation wage is the private information parameter critical for entry. We show that entry threat significantly distorts the wage, which in some cases adversely affects the firm’s ability to signal through price. Consequently, the separating equilibrium (in price) does not always exist. If, however, wage agreements are made public, signalling occurs with or without distortions in wage depending on whether the union’s bargaining power is high or low. Pooling equilibrium also exists and it features similar distortions. We also examine which signal, wage or price, generates greater social welfare.

Item Type:	Article
Faculty \ School:	Faculty of Social Sciences > School of Economics
Depositing User:	Julia Sheldrake
Date Deposited:	19 Apr 2011 08:08
Last Modified:	30 Jan 2023 11:30
URI:	https://ueaeprints.uea.ac.uk/id/eprint/29578
DOI:	10.1007/s00712-008-0030-2

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