Affordable Access

Access to the full text

On the Social Desirability of Centralized Wage Setting when Firms are Run by Biased Managers

Authors
  • Meccheri, Nicola
Type
Published Article
Journal
The B.E. Journal of Economic Analysis & Policy
Publisher
De Gruyter
Publication Date
Jun 01, 2023
Volume
23
Issue
3
Pages
701–725
Identifiers
DOI: 10.1515/bejeap-2022-0321
Source
De Gruyter
Keywords
Disciplines
  • Research Article
License
Yellow

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.

Report this publication

Statistics

Seen <100 times