Collective Bargaining under Non-Binding Contracts

We introduce collective bargaining in a static framework where the firm and its risk-neutralemployees negotiate over wages in a non-binding contract setting. Our main result is theequivalence between the non-binding collective equilibrium wage-employment contract andthe equilibrium contract under binding risk-neutral efficient bargaining. We also demonstratethat our non-cooperative equilibrium wages and profits coincide with the Owen values of thecorresponding cooperative game with the coalitional structure that follows from unionization....