benjamin5_PPT_15

benjamin5_PPT_15 - Chapter Fifteen Wage and Employment...

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Chapter 15-1 Chapter Fifteen Wage and Employment Determination Under Collective Bargaining Modeified from slides c reated by: Erica Morrill
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Chapter 15-2 Chapter Focus Union behaviour Interaction between firms and unions Inefficient production decisions Inefficient union practices Bargaining power
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Chapter 15-3 Theory of Union Behaviour Unions attempt to maximize objectives given economic constraints Ability to characterize preferences of unions is difficult
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Chapter 15-4 Union Objectives Utility is a positive function of wage rate (W) and employment (E): u(W,E) Indifference curve is downward sloping higher wage is needed to compensate for lower employment Curves have a convex shape diminishing marginal rate of substitution
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Chapter 15-5 D L Figure 15.1 Union Objectives and Constraints Real Wage Rate W P W a P Employment E a 2 a 1 U 0 a 3 U 2 a 0 U 1
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Chapter 15-6 Special Cases of Objective Functions Maximize the Wage rate indifference curves are horizontal straight lines Maximize Employment indifference curves are vertical straight lines Maximize the (real) wage bill Indifference curve is downward sloping and convex to
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benjamin5_PPT_15 - Chapter Fifteen Wage and Employment...

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