Full text: Wirtschaft und Gesellschaft - 1993 Heft 4 (4)

19. Jahrgang (1993), Heft 4 Wirtschaft und Gcsell!Jchaft ster pace, with v' (e) > 0 and v" (e) ? 0. Then the local union's payoffs can by written as if there is an agreement, H there is a strike. (71 In addition, the bargairring outcome must sathrfy two constraints. The first is that profits cannot be negative or the firm will shut the plant down. The second is that the wage cannot be less than the minimum wage requircd to attract workers.· Thus the solution must salisfy n ? 0 and u;?: r whcrc r is equal to the utility that workers can obtain by quit­ ting and searchirrg for employment elsewhere. According to starrdard bargairring models, the bargairring outcome with local bargairring is givcrr by w = {a [R (e, L, K)/L] + (1 .. a) v (e) t- r + v (e) if a [(R!L) - v] > r, otherwise [8) where aE (0,1) deperrds on the relative impatience of the two sides to settl.e (22). lf the wage rate is given by equation [8], it is easy to see that, with local bargaining, profits are given by n1• = (I - a) [R ( e, L, K) - v ( e) L./ - C (K) and the utility of the urriorr is giverr by u = a [R (e. L I()_ v (e)] I. L [9] ( I 0] provided u ;;::: r. Equations (9] arrd [JO] indicate that the union and the firm share the quasi-rents [R - v (e)] accordirrg to the proportians a and {1 - a). For our model of bargainirrg at the industry or national level, we assu­ me that that payoffs tu the union are the same as at the local level. For employers, we assume thal the employers' association seeks to m.aximize the sum of its members profiLs ::E (R,-wL;-CJ. Then, the bargairring out­ come is given by :ER (e, L. K) (l ,1 ( ) Wc = a I L + - a1 v e llll where R and L arc summed over all plants that are covered by the wage rregotiations providcd, as before, that u::::: r. Since a deperrds orr the relative discourrt rates of thc two sides (see footrrote 22), there is little reason to expect a to vary. systcmatically with the level of bargainirrg. Thus, we assume the union's share of thc quasi-rerrts is the same at diffe­ rent bargaining levels. What changes is thc definition of the relevant 437

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