On Centralized Bargaining in a Symmetric Oligopolistic Industry

In this paper we study interactions between labor and product markets, in an imperfectly competitive industry with centralized wage bargaining. Firms jointly bargain with the union over wages and then compete in prices or quantities. We show that the bargained wage is independent of the firms, the degree of substitutability of firms' products, and the type of market competition, in a broad class of industry specifications, including the standard linear symmetric demand system - linear one factor technology one. These results are robust with respect to different specifications of union's objectives. Finally we propose, motivated by the above independence property, that the bargained wage in a Bertrand homogenous market be taken as the limit of the solution of the differentiated case as the degree of substitutability goes to one.