The Dynamics of Monopoly Union Wages with Asymmetric Information

Abstract

Dunlop's (1994) work on the monopoly union model emphasizes that the primary role of wages is to distribute industry rents. This paper extends the model to two periods and it is, furthermore, assumed that firms are better informed than workers about the size or quality of capital. This variable is unchanged over time so the firm's first period action signals information relevant for the second period wage. This dynamic relationship tends to lower labour demand in the first period.