Strategic Delegation Under Unionised Duopoly: Who Will Bargain with Unions?

This paper investigates the choice of a firm's delegate (either the owner or the manager) bargaining wages and employment with a union under a unionised duopoly. We show that if an owner delegates the task of bargaining to a manager, the owner always compensates the manager for profits by penalising sales, regardless of whether the rival owner delegates or not. Moreover, we show that an owner's decision to delegate the task of bargaining to a manager depends on the incremental benefit of delegating and the cost of hiring a manager. The asymmetric outcome (wherein one owner delegates but the other does not) can occur if there is a sufficiently large disparity of hiring costs between the owners. Finally, we show that the union in an owner-managed firm always earns more than the union in a managerial firm.