Endogenous Effort in a Dynamic Model of Union-Firm Interaction.

This paper studies the implications of union deviation by reducing effort in a repeated game context. The author finds that failure to account for the possibility of union deviation may lead to overestimation of the possibility of cooperation. The author finds the surprising result that unions may reach the efficient outcome despite wage hikes because they work harder under cooperation. The author also finds that when effort is endogenous, the cooperative wage is likely to be higher than otherwise. Finally, the author's model predicts that, if the union alone deviates, effort will fall as the endgame approaches. However, wages could either rise or fall. Copyright 1997 by Scottish Economic Society.