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Unformatted text preview: an voter model. 1. The union monopoly model The union has 100 percent density and dictates the wage to the employers. Employers then hire according to the demand for labor schedule. Clearly, wages can be higher and employment will be lower than in a perfectly competitive environment. Union can maximize jobs for its members, but at the competitive (nonunion) wage rate. Then, why bother?
1 Union can maximize wage rate for it employed members, but then it becomes progressively smaller (UMWA). It can maximize the wage bill = wN. 2. Monopoly model with union indifference curve for (w, N). Trade-off between w, N and aggregated preference of union’s members. Then union uses its bargaining power to set wage at highest indifference curve and employer chooses N. [see slide] Outcome is similar to a monopoly model. 3. Efficient contracts model Monopoly union model is inefficient in the Pareto optimality sense: both parties can be made...
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- Spring '08