Affiliation:
1. Department of Economics and Management , University of Pisa , Pisa , Italy , RCEA (Fellow) and GLO (Fellow)
Abstract
Abstract
This paper compares the welfare outcomes obtained under alternative unionization regimes (decentralized vs. centralized wage setting) in a duopoly market in which shareholders delegate strategic decisions to biased (overconfident or underconfident) managers. In such a framework, the common tenet that consumer surplus and overall welfare are always higher under decentralized wage setting is completely overturned. Indeed, in the presence of centralized unionization (industry-wide union), firm shareholders always prefer to hire more aggressive or less conservative managers and, as a result, output (consumer surplus) and overall welfare are larger than in a decentralized wage setting structure.
Subject
Economics, Econometrics and Finance (miscellaneous),Economics and Econometrics
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