A Note on Timing of Endogenous Wage Bargaining: The Case of Complements

Kangsik Choi, Minhwan Lee

Division of Global Finance and Banking, Inha University, Incheon, Korea.
Graduate School of International Studies, Pusan National University, Pusan, Korea.

DOI: 10.4236/tel.[phone]                

Abstract

By introducing Cournot and Bertrand competition in adifferentiated goods with the case of complements into Nash bargaining solution problem, we investigate timing of endogenous wage setting where wages can be negotiated either simultaneously or sequentially. Contrary to the case of substitutes, we show that regardless of the bargaining power, the type of product market competition (Cournot or Bertrand) and the degree of complementarity, 1) bargaining over wages is always simultaneous when the goods are complements; and 2) the social welfare under both Cournot and Bertrand competitions can improve when bargaining over wages is simultaneous.

Keywords

Bargaining; Complements; Cournot-Bertrand Competition; Social Welfare

Conflicts of Interest

The authors declare no conflicts of interest.

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