Bargaining over employment as a firm strategic choice

This paper develops a simple model as to why unionized Cournot firms acting noncooperatively in the product market may find it optimal to commit to bargaining outcomes with their specific union, which are off the labor demand curve, hence restricting their behavior to nonprofit maximizing practices in their product markets. The prediction that power over labor conceded strategically to the union by the firm is negatively linked to union wage power is not rejected on a panel of Belgian firms as well as the prediction that the union bargaining power can be affected by product market structure and other variables affecting union wages.