TITLE:
A Note on Timing of Endogenous Wage Bargaining: The Case of Complements
AUTHORS:
Kangsik Choi, Minhwan Lee
KEYWORDS:
Bargaining; Complements; Cournot-Bertrand Competition; Social Welfare
JOURNAL NAME:
Theoretical Economics Letters,
Vol.3 No.1,
February
26,
2013
ABSTRACT: By introducing Cournot and Bertrand competition in adifferentiated goods with the case of complements into Nash bargaining solution problem, we investigate timing of endogenous wage setting where wages can be negotiated either simultaneously or sequentially. Contrary to the case of substitutes, we show that regardless of the bargaining power, the type of product market competition (Cournot or Bertrand) and the degree of complementarity, 1) bargaining over wages is always simultaneous when the goods are complements; and 2) the social welfare under both Cournot and Bertrand competitions can improve when bargaining over wages is simultaneous.