Entry Threats and Inefficiency in `Efficient Bargaining'

Pal, R.; Saha, B.

doi:10.1111/sjpe.12091

Entry Threats and Inefficiency in `Efficient Bargaining'

Pal, R.; Saha, B.

Authors

R. Pal

Dr Bibhas Saha b.c.saha@durham.ac.uk
Associate Professor

Abstract

We study limit pricing in a model of entry with asymmetric information, where the incumbent firm's wage is endogenously determined through ‘efficient bargaining’ with its union. In the presence of entry threat, the incumbent firm-union pair may face a conflict between rent sharing and transmitting its cost information. When the wage is not observable to outsiders and employment is the only signalling instrument, over-employment features in all entry deterring contracts. When the wage is also observable, information transmission becomes easier. Most of the time, then, but not always, the efficient contract deters (induces) entry against the low (high) cost incumbent.

Citation

Pal, R., & Saha, B. (2016). Entry Threats and Inefficiency in `Efficient Bargaining'. Scottish Journal of Political Economy, 63(3), 258-277. https://doi.org/10.1111/sjpe.12091

Journal Article Type	Article
Acceptance Date	Apr 30, 2015
Online Publication Date	Jun 8, 2015
Publication Date	Jul 1, 2016
Deposit Date	Apr 3, 2015
Publicly Available Date	Jun 8, 2017
Journal	Scottish Journal of Political Economy
Print ISSN	0036-9292
Electronic ISSN	1467-9485
Publisher	Wiley
Peer Reviewed	Peer Reviewed
Volume	63
Issue	3
Pages	258-277
DOI	https://doi.org/10.1111/sjpe.12091
Public URL	https://durham-repository.worktribe.com/output/1410583

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Copyright Statement
This is the accepted version of the following article: Pal, R. & Saha, B. (2015), Entry Threats and Inefficiency in ‘Efficient Bargaining’. Scottish Journal of Political Economy, 63(3): 258-277, which has been published in final form at http://dx.doi.org/10.1111/sjpe.12091. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.