Center for Economic Research, Department of Economics, University of Minnesota
Many unions in the United States have for several years engaged in
what is known as pattern bargaining-a union determines a sequence
for negotiations with firms within an industry where the agreement
with the first firm becomes the take-it-or-leave-it offer by the union
for all subsequent negotiations. In this paper, we show that pattern
bargaining is preferred by a union to both simultaneous industry wide
negotiations and sequential negotiations without a pattern. In recent
years, unions have increasingly moved away from patterns that
equalized wage rates across firms when these patterns did not equalize
interfirm labor costs. Allowing for interfirm productivity differentials
within an industry, we show that pattern bargaining, whether it involves
commitment to a pattern in wages or to a pattern in labor
costs, achieves the highest possible payoff for the union from among
a large group of alternatives. We also show that for small interfirm
productivity differentials, the union most prefers a pattern in wages,
but for a sufficiently wide differential, the union prefers a pattern in
labor costs. These results provide an explanation for the pervasive
use of pattern bargaining as well as many of the observed changes in
pattern bargaining that have occurred in recent years.
Marshall, R.C. and Merlo, A., (1996), "Pattern Bargaining", Discussion Paper No. 290, Center for Economic Research, Department of Economics, University of Minnesota.
Marshall, Robert C.; Merlo, Antonio.
Center for Economic Research, Department of Economics, University of Minnesota.
Retrieved from the University of Minnesota Digital Conservancy,
Content distributed via the University of Minnesota's Digital Conservancy may be subject to additional license and use restrictions applied by the depositor.