collective bargaining
(noun)
A method of negotiation in which employees negotiate as a group with their employers.
Examples of collective bargaining in the following topics:
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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
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Depression and Post-War Victories
- 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.
- Kennedy issued an executive order giving federal employees the right to organize and to bargain collectively (but not to strike).
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The Prisoner's Dilemma and Oligopoly
- The prisoner's dilemma shows why two individuals might not cooperate, even if it is collectively in their best interest to do so.
- Sometimes firms fail to cooperate with each other, even when cooperation would bring about a better collective outcome.
- The police offer each prisoner a bargain :
- However, the collective outcome would be improved if firms cooperated, and were thus able to maintain low production, high prices, and monopoly profits.
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Impact of Unions on Unemployment
- They function by negotiating with employers to create a collective agreement that applies to all union members and typically lasts for a set time period.
- 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.
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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.
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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.
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The Definition of Money
- It is thus a basis for quoting and bargaining prices.
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Growth of Government Intervention
- Independent labor unions are guaranteed the right to organize, bargain, and strike.
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Open Economy Equilibrium
- For example, if there is excess supply (market surplus), this would lead to prices cuts which would decrease the quantity supplied (reduces the incentive to produce and sell the product) and increase the quantity demanded (by offering bargains), which would eliminate the original excess of supply.
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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.