Union Power and Price fixation : A General Equilibrium Perspective

Wage and price formation are analysed in a general equilibrium model combining wage bargaining, monopolistic competition, stochastic demand, and technological constraints. The alternative implications of "efficient" and "right-to-manage" models of bargaining are studied. The price-cost margin is less favorable to firms with efficient bargaining. A Phillips-like wage relationship obtains only in the right-to-manage case, although the interpretation of the role of unemployment is more complex than in standard models. Aggregate demand remains neutral despite bargaining, but fixed nominal strike payments are enough to create non-neutrality.