Relative Bargaining Research Articles

Relative wages, labor specialization and bargaining patterns

The goal of this paper is to study the effects of centralized and decentralized bargaining patterns on wage inequality when there are two different types of labor, skilled and unskilled. We present two models where labor is specialized between firms, that is, there are two types of firms, each one employing one type of labor. We show that the revenue shares of the production factors in each type of firm and the union power are crucial determinants of the relative wage. In contrast, the relative expected wage is the same across models and bargaining patterns.

Hospital competition in HMO networks

We develop a framework for analyzing bargaining relationships between hospitals and HMOs under selective contracting. Using a unique dataset on hospitals in the Los Angeles area from 1990 to 1993, we estimate the determinants of actual negotiated prices paid to hospitals by two major HMOs. We find that a hospital’s bargaining power, and thus its price, decrease when the HMO can readily turn to alternative networks that exclude the hospital. We simulate the effect of hypothetical hospital mergers on bargaining power and find that some hospital mergers, even in urban areas with many nearby hospitals, can lead to significant price increases.

Lawless Law? The Subversion of the National Labor Relations Act

In this paper, we demonstrate that the court-developed doctrine which allows an employer to implement its final offer upon reaching an impasse has now become a tool for lawlessness and that this important explanation for the decline of union membership in the United States has been wrongly ignored and overlooked. Our analysis of data collected from fifteen years of National Labor Relations Board decisions on this issue provides powerful support for the conclusion that employers are using this doctrine to create roadblocks to agreement and to end collective bargaining relationships. Not only does it permit employers to deunionize and refuse to negotiate, it actually creates an incentive for employers to use the law as a tool to deunionize. As a result, a law enacted to promote collective bargaining has, instead, become one which destroys collective bargaining. Implementation has become anything but an obscure or rare event. Rather, it is now common and has played a part in high-profile labor disputes, including disputes at Caterpillar, the Detroit News, the National Football League, the baseball players strike, and International Paper. Unions and workers are not the only ones to suffer its destructive role. Even in less publicized cases, its impact on employers, workers, and the government, can be sizeable. In a recent case discussed in the article, the hearing lasted 60 nonconsecutive days and more than 1000 pages of briefs were filed. Approximately 450 employees, some of whom lost $17,000 a year, are entitled to back pay in addition to recompense for cutbacks in pensions, vacations, holidays, and other sorts of employee compensation. It is estimated that backpay will exceed $40 million. The back pay is so great the employers may be put out of business. Although it did not suffer personally, trying and deciding a case lasting sixty days was also enormously expensive for the government. Our preliminary analysis of the data leads us to conclude that this labor law doctrine has advanced far down the wrong road, with direct disastrous consequences for unions and workers. However, it should be borne in mind that although they suffer the most visible losses, they are not the only victims. The government bears the cost of investigating, prosecuting, and deciding cases, the vast majority of which lead to the conclusion that employer claims of impasse are frivolous. Surely this money could be put to better uses. Employers themselves do not escape costs. They risk enormous backpay liability, and most, whether they succeed or not before the Board, must deal with extended disruption to their workforces and productivity. In the end, this may be sufficient to put the company out of business.

Bargaining efficiency and screening: an experimental investigation

This paper investigates whether information about generosity or fairness can be useful in reducing dispute costs and enhancing bargaining efficiency. Subjects were first screened using a dictator game, with the allocations chosen used to separate participants into two types. Mutually anonymous pairs of subjects then bargained, with a dispute cost structure imposed. Sorting with identification reduces dispute costs; there are also significant differences in bargaining efficiency across pairing-types. Information about types is crucial for these differences and also strongly affects the relative bargaining success of the two types and the hypothetical optimal bargaining strategy.

The 1999 reform of the structural fund regulations: multi-level governance or renationalization?

This article examines the June 1999 reform of the European Union’s structural funds. This is the second major reform to the regulations established in 1988, the first having occurred in 1993. The article evaluates the 1999 changes in relation to the earlier decisions. It also seeks to determine what they imply for a theoretical understanding of the policy sector. In particular, it evaluates whether the 1999 reforms represent a renationalization of the funds. The conclusion reached is that central governments were undoubtedly crucial to the reform process and will remain pivotal actors in the operation of the funds. Nevertheless, the 1999 reforms, as with the 1993 reforms before them, do not represent a complete renationalization of the funds. As identified by the multi-level governance perspective, the Commission will continue to be active in the sector in a bargaining relationship with the central governments. Subnational actors will also be important, although this importance will be heavily influenced by the central governments.

Corporate takeovers, bargaining and managers' incentives to invest

This paper analyzes the impact of potential takeovers on the investment decisions of managers. The takeover involves bargaining over the potential surplus between the acquiring firm, the target manager, and shareholders of the target firm. The anticipation of future takeover gains will influence the decision-makers to invest ex ante. Interestingly, both over and underinvestment might prevail, depending on the relative bargaining powers of the parties. The model encompasses specific cases documented in the empirical literature and mergers and acquisitions (M&A) practice. It is, therefore, particularly suited to focus on the desirability of anti-takeover legislation. Copyright © 2000 John Wiley & Sons, Ltd.

Worker Bargaining Power and Real Wages from 1870 to 1913: Phelps Brown reconsidered

This paper discusses Phelps Brown's claims that (1) real wages in the long run cannot be explained by a theory where distribution is determined by the relative worker bargaining position, and (2) changes in real wages would be strictly linked to changes in the average product per worker.

Labor-Management Cooperation—City of Portland, Maine

Portland, Maine had a traditional bargaining relationship. It now has one of the most complete programs of service-focused labor management cooperation of any place in the country. A broad range of city services, including an emerging effort in public safety are now run this way, with workers and their union leaders, managers and elected officials all benefitting from and praising the new relationship. Portland made this radical transformation without a crisis of fiscal pressure. New leadership in the city manager's office and responsive leadership in key bargaining units led to an experiment on the building of Hadlock Field. A partnership between the department head and the president of the AFSCME local led the project. Instead of contracting out to meet a short deadline and employ skills that didn't seem to exist, the parties worked out a special set of arrangements and via cross-training, teamwork and dedication completed the stadium in seven months, millions under the expected budget. From the pride and satisfaction of this joint effort, Portland, AFSCME and other key units worked to create a new participative relationship across the full range of city services. The effort has produced major cost savings and service improvements, has strengthened both the management and the union and has produced a far less adversarial bargaining relationship. In one innovation, separate services were split up and reorganized into district teams, providing customer-oriented public works services in areas that match city council districts. Cross training and new responsibilities have resulted in new opportunities and pay raises, yet have saved time and money. The piece, co-authored by union and management leaders from Portland, illustrates the breadth and depth of what they have achieved without a crisis as the initiating factor.

Interest-Based Bargaining: Labor and Management Working Together in Ramsey County, Minnesota

In a local example, where a new approach to bargaining got started, we find Ramsey County, Minnesota. After a bitter strike and experiments with outside negotiators, the parties turned to interest-based bargaining as a way to improve the bargaining relationship. Even though the brief period that the county contracted out negotiations seemed peaceful compared to the preceding tumultuous years, the parries found that an interest-based bargaining relationship produced results beyond expectations. Construing bargaining as part of a mutual interest relationship, the parties rely on each other's on-going service and quality of work-life concerns. Now, contracts are renegotiated in record time, before expiration, in contrast to the lengthy delays under the traditional collective bargaining model. Issues are addressed by joint groups between bargaining rounds. Grievances have been reduced, thus causing less disruption. Better service is now provided, and customer service has been enhanced. The parties also applied the interest-based approach to the always complicated problem of merging departments. Correcting the anachronism of separate city and county health departments, this new relationship and approach was used to handle the personnel and labor issues involved in such a merger. Here, Ramsey County shows how to move in a municipal context from a traditional to a cooperative relationship and how quickly the benefits spread out and emerge.

A Pie Allocation Among Sharing Groups

This paper deals with a pie allocation problem to users, who are divided intosharing groups, that are not necessarily disjoint. The pie is allocated among the groups, rather than the users. The portion of a sharing group is a public good for its members, that is, all of them can enjoy it. A non-cooperative game for allocating the pie and a special equilibrium outcome,strongly disappointment-free allocation, are defined. We prove the existence of a unique such allocation and show that it coincides with the Nash solution of the related bargaining problem.Journal of Economic LiteratureClassification Numbers: C70, C71, C72 and C78.

Bargaining Efficiency and Screening: An Experimental Investigation

This paper investigates whether information about generosity or fairness can be useful in lowering dispute costs and enhancing bargaining efficiency. Subjects were first screened using a dictator game, with the allocations chosen used to separate participants into two types. Mutually anonymous pairs of subjects then bargained, with a dispute cost structure imposed. Sorting with identification reduces dispute costs; there are also significant differences in bargaining efficiency across pairing types. Information about types is crucial for these differences and also strongly affects the relative bargaining success of the two types and the hypothetical optimal bargaining strategy.

Making Game Theory Useful: Predicting Debt Negotiations

In Debt Games, Vinod Aggarwal has taken a giant step toward making game theory useful for understanding and even predicting important outcomes in international relations. Aware that game theory often falls short empirically both because it is static (that is, actors cannot change the game from within) and because it infers payoffs retrospectively from outcomes, Aggarwal develops a model that is both predictive and dynamic. His model derives payoffs from a prior set of situational constraints and enables actors to use norms, capabilities, and alliances to alter sequentially the type of game being played. Aggarwal tests this more predictive and dynamic model by studying sixty-one cases of debt rescheduling involving groups of lenders and four principal debtor countries: Mexico and Peru (from the 1820s to the 1950s), and Argentina and Brazil (from the 1970s to the 1990s). He conceives each case of debt negotiations as a bilateral bargaining relationship involving strategic interaction between a single debtor and the group of lenders. Although Aggarwal reviews systemic influences on bilateral bargaining in each historical period (including such neorealist variables as the number of major actors, and such neoliberal variables as the strength of international regimes), he finds that these factors leave much variation to be explained. He seeks answers to more specific questions. For example, how much adjustment will a debtor undertake, and what concessions will the lenders offer? Will creditor governments or international organizations intervene in the negotiations? Depending on initial outcomes, will debtors or lenders try to alter the terms of subsequent negotiations (games)? To answer these questions, Aggarwal constructs his game theoretic model in three parts. First, in the study's most innovative contribution, he derives preferences for both debtors and lenders by examining their goals and the weights they assign to these goals in terms of key aspects of their situations. Debtors seek to (1) secure additional funds, (2) minimize the political and economic costs of adjustment, and (3) minimize penalties by maintaining good relations with lenders. Lenders seek to (1) minimize further resource commitments, (2) encourage debt servicing, and (3) avoid possible penalties imposed by debtors. Debtors and lenders weight these goals differently depending on three situational factors: (1) their overall capabilities, (2) their capabilities within the specific debt-related issue area, and (3) the strength or weakness of their supporting domestic coalitions. Thus debtors with strong domestic coalitions give less weight to adjustment costs than those with weak coalitions; lenders who are financially secure give lower priority to debt servicing; and so on.

East Asian Broadcasting Industries: Global, Regional, and National Perspectives

Global, regional, and national-level forces are shaping East Asian television broadcasting industries. National factors still have the greatest impact, but global and regional forces are becoming more important. Global media firms are expanding in the East Asian region by supplying programming to national broadcasters and, where host governments permit, by making equity investments in Asian media companies. They are also forming strategic alliances wih other media transnational corporations as well as with regional and national firms. Asian broadcasters are also expanding their operations within the region, and the ethnic Chinese community in Southeast Asia is particularly important in this process. In addition, broadcasting firms with close linkages to ethnic Chinese business networks are expanding their regional operations. Because of government’s role in regulating content and entry, the bargaining relationships between states and foreign capital are central to the industry’s expansion.

Control and Performance in International Joint Ventures

The authors examine the meaning of control in international joint ventures (IJVs) and the relationships of potential means of control in such organizations to the performance satisfaction of the foreign partner. They propose a conceptual model that provides both a traditional ownership-focused internalization perspective on those issues and an integrated approach combining a broader transaction cost interpretation of control with a resource input-based bargaining power model. A set of simultaneous structural equations with endogenous explanatory variables provides multiple possible paths from various resource and power inputs through different means of control to perceived performance satisfaction. In such a model, intermediate variables act both as dependent and independent variables; thus the complex theoretical interactions of the variables are modeled more comprehensively and realistically than in single-equation models. To test the model and compare the theoretical relationships, the authors used data from a survey of managers in Norwegian multinational firms having at least one IJV. For structural equation modeling with latent variables, they used the LISREL VII program that simultaneously fits the measured variables to the latent variables and provides a maximum likelihood solution for the structural equation system. The results clearly reject the traditional internalization approach to IJV governance that relies strictly on ownership share to delineate degree of control. However, relative resource input has a strong relationship to relative bargaining of the parent companies, which then drives equity share, control over specific activities, and perceptions of overall control of the IJV. That result supports a bargaining-power-based model of IJV control. The relatedness of the strategic resources of the parent and the joint venture also drives specific control, implying that although transaction risk is important to governance, governance is provided by specific control rather than ownership level. Perceptions of performance are strongly and positively related to overall control. Those results suggest that specialized control provides both protection and exploitation of key resource inputs and is gained through increased bargaining power. Higher levels of specific control result in a perception of overall control and thereby satisfaction with perceived levels of IJV performance among foreign parent company managers. Interestingly, traditional exogenous determinants of IJV control and performance such as government mandates, cultural similarity, and international experience levels fail to provide significant effects. Rather, the focus is on endogenous aspects of the parent-IJV relationship, suggesting that the key to parent firm satisfaction with an IJV is control over operations that use key strategic inputs from the parent.

The bargaining relationship between foreign mnes and host governments in latin america

The relationship between international firms and national governments can usefully be understood in terms of bargaining theory. This article develops an explicit model of the bargaining relationshi...

Playing the Team Game: Unions in Australian Professional Team sports

League and club officials in different Australian professional team sports have initiated a variety of labour market controls that have restricted the economic freedom and income-earning potential of players. Since before the First World War, different generations of players in a variety of sports have attempted to use collective action to respond to these and other employment problems. Most of these attempts were abortive or shortlived. It is only in the 1990s that Australian player associations have experienced the successes usually afforded to unionism. This paper examines the historical and contemporary record of player associa tions in Australian team sports. It begins with an examination of the various labour market rules that have governed the employment of players. This is followed by an analysis of problems of organizational effectiveness that have traditionally dogged the operation of player associations. The next section focuses on developments in the 1990s. With the exception of rugby league and baseballers, player associations have solved organizational problems of the past, and have possessed leaders able to develop a bargaining relationship with their respective leagues and clubs.1

Bargaining power and wages: A game-theoretic model of gender differences in union wage bargaining

Abstract In this paper a model of gender differences in the process of wage bargaining is developed, with the aim of assessing the potentials of bargaining theory in contributing to a better understanding of the male/female wage gap. It is shown that if the assumption of a united union is relaxed in order to allow for conflicts of interest between the sexes, two interesting factors that might cause women's wages to differ from those of men come into sight. First, the relative bargaining strengths of female and male unionists, and second, the threat points of female and male unionists.

Institutional Turmoil and Strike Activity in Korea

The economic strike literature focuses on rational actors engaging in strike activity to increase their economic outcome. A separate literature emphasizes institutional, behavioural and political reasons for strike activity. While these literatures are rarely integrated, we posit that micro-level institutional turmoil, indexed by the presence of intra-firm union rivalries or outside third-party provo cateurs, and the maturity of the bargaining relationship, are important determi nants of economic strike activity. In three new micro-level data sets from Korea, micro-level institutional turmoil is found to be significantly related to strike activity.

Relative Bargaining Power in International Debt Negotiation: Collective Action, Sovereignty En Garde, or Mutual Partisan Adjustment?

This paper analyzes the strategic conduct of three classes of actors in the management of Third World debt problems. It examines the behavior and incentives of the private banks, their home governments, and their foreign governmental clients in light of perspectives on collective action, sovereignty en garde, and partisan mutual adjustment. The statistical patterns of past debt negotiation outcomes show some shortcomings of these perspectives, while at the same time pointing to other aspects of reality which can be usefully illuminated by them. Both the theoretical and empirical analyses suggest international debt management as a mixed-motive game among purposive egoists. The actors' bargaining leverage, however, differs considerably with respect to the determination of loan availability as opposed to the negotiation over the financial terms for the loans.

The Importance of Others' Welfare in Evaluating Bargaining Outcomes

This research proposes that negotiators consider each other's payoffs in their evaluation of potential settlements beyond the level necessary to maintain the bargaining relationship. We further hypothesize that the way in which negotiators weight their opponents' payoffs, relative to their own, is a function of characteristics of the relationship and of the bargainers' personalities. Specifically, we consider liking of the other party, payoff expectations, satisfaction with past settlements, the likelihood of future negotiations, egocentricity, and power orientation. We demonstrate the impact of these factors on the satisfaction negotiators derive from profiting more and less than their opponents using data from an experiment in which subjects negotiate with computer-simulated opponents.