Endogenous scope of firm-union bargaining with vertical pay comparisons

摘要: Abstract There is strong evidence that employees’ motivation and incentives in the workplace are affected by vertical pay comparisons. In a stylized Cournot duopoly model with firm–specific unions institutionalize workers’ fairness concerns, we show universal wage employment (w,e)–bargaining may arise as equilibrium scope of bargaining institution. We thus propose intra–firm concerns resolve mismatch between recent findings empirical literature on labor market institutions predictions traditional models will never (the “Scope Bargaining Puzzle”). derive number testable hypotheses address shift towards more decentralized institutions, decline unions’ power, prevalence (w,e)–bargaining.