An experimental analog to two-party bargaining

Abstract

Collective bargaining is a key element in the functioning of our economic system. The patterns of wages and working conditions established in union-management agreements spread throughout the economy. The structure and level of prices and the allocation of resources respond to cost and income patterns that have been determined through the bargaining process. It is difficult to isolate the independent effects of unionization and bargaining power on wages and working conditions, and it may be true that in the long run the economic and political environment determines the outcome of labor negotiations. However, in the short run the terms of employment and the economic variables which react to them are dependent on the outcome of collective bargaining. The bargaining behavior of union and management representatives and the outcome of their negotiations reflect the complex institutional and economic environment within which negotiations take place. In view of the importance of the economic decisions which are made through the process of collective bargaining, we should know more about the impact of the environment on the process and results of negotiations. This study uses an experimental technique to study the effects of some interesting environmental variables on 2-party bargaining.