Sequencing strategically: wage negotiations under oligopoly

Abstract

Should an industry-wide union in a unionized oligopoly (e.g. the United Auto Workers in the US) negotiate new contracts by bargaining with firms simultaneously, or should it ‘strategically sequence’ its bargaining partners? The models presented isolate two key factors affecting this decision: pre-existing contracts, and the post-negotiation product market game. The better the preexisting contracts for the union, the more attractive is the option of sequencing. Moreover, a high wage negotiated with the first firm reduces product market competition, increasing other firms’ ability to pay higher wages as well. This adds to the attractiveness of strategic sequencing for the union.