Union-firm interaction and the right to manage

In the context of price-setting oligopoly, this paper shows that there may be consensus in union-employer bargaining for limiting the scope of bargaining to determining wage levels and allowing the employer to act unilaterally when competing in the product market. A strategic commitment by each union-firm pair to a right-to-manage framework, rather than a participatory approach, may benefit the bargaining parties since this entails higher negotiated wage rates which, by dampening competition in the product market, may allow for an increase in the amount of surplus generated by the parties.