Many unions in the United States have for several years engaged in what is known as pattern bargaining. In this article, we show that pattern bargaining is preferred by a union to both simultaneous industry-wide negotiations and sequential negotiations without a pattern. Allowing for interfirm productivity differentials within an industry, we show that for small differentials, the union most prefers a pattern in wages, but for a sufficiently wide differential, the union prefers a pattern in labor costs. Finally, we demonstrate that pattern bargaining can be a significant entry deterrent. This provides an explanation for why incumbent firms in an industry may support the use of pattern bargaining in labor negotiations.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics