Efficient Over-manning

De la Croix, David;Toulemonde, Eric
(1995) Oxford Economic Papers — Vol. 47, n° 3, p. 493-500 (1995)

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Abstract
The usual 'efficient' bargaining solution between a monopolistic firm and a union has always: been derived under the constraint that the firm produces on its production frontier. We show thar, if the union is risk-averse and powerful enough, this constrained efficient bargaining solution may lead to a negative marginal revenue. In this case, it is mutually beneficial to lower the output level and to engage more workers, producing therefore below the production frontier, The presence of this efficient over-manning may invalidate part of the testing literature on bargaining.
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De la Croix, D., & Toulemonde, E. (1995). Efficient Over-manning. Oxford Economic Papers, 47(3), 493-500. https://hdl.handle.net/2078.5/145401 (Original work published 1995)