Bilateral Delegation, Wage Bargaining, and Innovation

Mukherjee, Arijit; Saha, Bibhas

Abstract

A firm undertakes workers’ productivity improving R&D before negotiating wage with the union, where negotiation can take place between their incentivised delegates. Under bilateral delegation profit, R&D and productivity-wage gap all increase, whilst the union’s utility decreases, with the union’s bargaining power. However, to secure wage gains from productivity improvements via greater R&D and to ensure Pareto improvement in payoffs, the union should refrain from its own delegation, while the firm delegates alone. This will indeed be the equilibrium outcome if the union can commit not to delegate and if its bargaining power is above a critical level.

Citation

Mukherjee, A., & Saha, B. (2024). Bilateral Delegation, Wage Bargaining, and Innovation. Journal of Institutional and Theoretical Economics, https://doi.org/10.1628/jite-2024-0023

• Journal Article Type: Article
• Acceptance Date: Aug 8, 2023
• Online Publication Date: Aug 12, 2024
• Publication Date: Aug 12, 2024
• Deposit Date: Aug 8, 2023
• Publicly Available Date: Aug 13, 2025
• Journal: Journal of Institutional and Theoretical Economics
• Electronic ISSN: 0932-4569
• Publisher: Mohr Siebeck
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1628/jite-2024-0023
• Keywords: Managerial incentives, right-to-manage bargaining, bilateral delegation, R&D, productivity-wage gap
• Public URL: https://nottingham-repository.worktribe.com/output/24115099