bargaining power

Examples of bargaining power in the following topics:

• Impact of Unions on Unemployment

  • This gives workers as a whole a stronger bargaining position when negotiating working conditions and pay.
  • Trade unions in their current form became popular during the industrial revolution, when most jobs required little skill or training and therefore almost all of the bargaining power fell with employers rather than employees.
  • Unions are able to raise wages because, when they are powerful, they may turn the labor market into a monopoly market.

• Depression and Post-War Victories

  • The law also limited the power of federal courts to stop strikes and other job actions.
  • One of these, the National Labor Relations Act of 1935 (also known as the Wagner Act) gave workers the right to join unions and to bargain collectively through union representatives.
  • The public reacted strongly to these disruptions and to what many viewed as excessive power of unions allowed by the Wagner Act.
  • Unions gained a new measure of power in 1962, when President John F.
  • Kennedy issued an executive order giving federal employees the right to organize and to bargain collectively (but not to strike).

• The Coase Theorem

  • According to the theorem, if trade in an externality is possible and there are no transaction costs, bargaining among private parties will lead to an efficient outcome regardless of the initial allocation of property rights .
  • The farmer has an incentive to bargain with the rancher to find a more efficient solution.
  • If it is more efficient to prevent cattle trampling a farmer's field by fencing in the farm, rather than fencing in the cattle, the outcome of the bargaining will be the fence around the farm.
  • In practice, transaction costs are rarely low enough to allow for efficient bargaining and hence the theorem is almost always inapplicable to economic reality.
  • According to the Coase theorem, two private parties will be able to bargain with each other and find an efficient solution to an externality problem.

• Labor Union Impacts on Equilibrium

  • The primary activity of the union is to bargain with the employer on behalf of union members and negotiate labor contracts.
  • In order to achieve these goals unions engage in collective bargaining: the process of negotiation between a company's management and a labor union.
  • When collective bargaining fails, union members may go on strike, refusing to work until a firm addresses the workers' grievances.
  • Examine the role of unions and collective bargaining in labor-firm relations

• Growth of Government Intervention

  • As the 20th century approached, however, the consolidation of U.S. industry into increasingly powerful corporations spurred government intervention to protect small businesses and consumers.
  • Roosevelt and the Congress enacted a host of new laws that gave government the power to intervene in the economy.
  • Independent labor unions are guaranteed the right to organize, bargain, and strike.

• Relationship Between Expectations and Inflation

  • Accordingly, because of the adaptive expectations theory, workers will expect the 2% inflation rate to continue, so they will incorporate this expected increase into future labor bargaining agreements.
  • Although the workers' real purchasing power declines, employers are now able to hire labor for a cheaper real cost.
  • They demand a 4% increase in wages to increase their real purchasing power to previous levels, which raises labor costs for employers.

• Types of Private Solutions

  • The Coase theorem, which was developed by Ronald Coase, posits that two parties will be able to bargain with each other to reach an agreement that efficiently addresses externalities.
  • If the conditions are met, the bargaining parties are expected to reach an agreement where everyone is better off.
  • In practice, however, transaction costs do exist, and the bargaining process does not always run smoothly.

• The Definition of Money

  • It is thus a basis for quoting and bargaining prices.

• The Prisoner's Dilemma and Oligopoly

  • The police offer each prisoner a bargain :

• Market Power

  • Market power is a measure of the economic strength of a firm.
  • However, market size alone is not the only indicator of market power.
  • Other factors that affect a firm's market power include:
  • However, being a large firm does not necessarily equal market power.
  • A firm's market power influences its behavior.