outside options in a bargaining model with decay in the size of the cake abstract a simple bargaining model in which the cake decays over time at a positive rate is analysed in the limit the unique perfect equilibrium payoffs take the split the difference form these results generalise to three party bargaining

is unemployment lower if unions bargain over employment would there be more employment if unions bargained over employment and not only over wages most economists seem to answer yes 1

the influence of production technology on risk and the cost of capital this paper uses a time state preference valuation model to examine how the firm s choice of technology and production method affects its equilibrium level of risk and as a result the firm s cost of capital a fixed and flexible method of production is analyzed for a firm using a cobb douglas production function in both cases it is found that risk and the cost of capital decrease with the level of capital intensity implications are drawn for the specification of empirical tests of the determinants of risk

market structure uncertainty and the cost of equity capital the cost of capital plays a key role in the allocation of funds between different sectors of the economy the linkage between the cost of capital and market power has been hinted at by several authors however no rigorous development has been made this paper uses the simple static analysis of the capital asset pricing model to show that with more market power a firm s cost of equity capital declines hence firms with more market power will be able to raise equity capital at lower market rates than would the competitive firm if the product market had been perfectly competitive

wage pressure bargaining and price cost margins in uk manufacturing to the extent that union employer bargaining is efficient price cost margins in oligopolistic industries are predicted to depend on wage rents and on the elasticity of substitution between wages and employment in union preferences unanticipated wage inflation will also affect margins cross section and time series analysis of price cost margins in u k manufacturing industries finds that margins tend to be eroded by the level of wage rents and are invariant to the rate of wage inflation copyright 1990 by blackwell publishing ltd

on union preferences and labour market models insiders and outsiders this paper constructs a model of trade union behavior in which there is a distinction between insiders and outsiders this is used to examine one of the most troublesome issues in macroeconomic theory namely the extent to which a rise in aggregate demand might generate wage increases rather than growth in employment a generalization of the most widely used union utility function is presented the analysis reveals the conditions under which insiders will agree to let outsiders into employment derives two step wage preferences and proves a new result on wage rigidity copyright 1987 by royal economic society

oligopoly profit sharing contracts and the firm s systematic risk abstract this article examines the properties of wage and profit sharing contracts in a model of oligopoly with capital market equilibrium while profit sharing contracts dominate market wage contracts profit sharing also reduces the firm s cost of equity capital under fairly broad conditions of oligopoly by enforcing lower costs in exchange for a pre determined share of cash flows to workers this form of operational leverage both reinforces the classical effect of market power on systematic risk and the impact of profit sharing on the corporate finance of the firm as previously suggested by ichino 1994 european economic review 38 1411 1422

market and industry structure and corporate cost of capital the impact of the structural attributes of industries on the cost of capital to constituent firms is examined within the framework of the capital asset pricing model capm the relationship between industry structure and systematic risk which the capm posits as the sole determinant of security returns is investigated using regression methodology the results show that industry characteristics such as capital intensity capital to labour ratio and entry barriers such as advertising have a significant influence on systematic risk and hence on the cost of capital to firms recent us studies e g sullivan 1982 have investigated the relationship between market power and the stock market return on equity using the capital asset pricing model capm within the capm framework investor required return is a linear function of systematic risk the impact of industry structure on expected return is therefore likely to be transmitted through investors perceptions of the relationship between the structural variables and firm systematic risk some recent theoretical studies have attempted to model such a relationship this paper reports an empirical examination of the predictions resulting from these and other related models for a sample of uk firms our results show that industry structural characteristics e g capital intensity have a significant influence on systematic risk and hence cost of capital of firms although the predictions of the extant theoretical models are only partly confirmed the next section identifies a number of microeconomic determinants of corporate systematic risk section iii discusses the methodology employed in the study section iv describes the sampling procedure and explanatory variables results are discussed in section v the final section provides a summary and the conclusions

the cost of capital and the market power of firms reply and correction elements which can be specified when equation 4 was tested the variables used to measure financial leverage size operating leverage and growth were all significant at least at the 5 level in the expected direction but the market power variable then lost significance in the absence of an integrated theoretical model the relationship between market power and systematic risk can only be studied empirically the statistical results reported here suggest that powerful firms do not have any unusual ability to influence their cost of equity capital market power appears to have an impact on equity yields because of investors rational evaluation of managers operating and financial policies

systematic risk and the theory of wage indexation in this article the author integrates the theory of optimal wage indexation with capital market theory the optimal indexation factor in his model depends on workers preferences firm specific variables and economywide capital market variables a major difference between the results of the model and those of the previous literature is that in his model nonsymmetric randomness does not affect the indexation decision in addition the effects of economywide capital market variables can provide an explanation for why the author does not observe wage contracts with more than perfect indexation contracts where real wages rise with unexpected inflation copyright 1990 by the university of chicago

predicting risk some new generalizations existing adjustment techniques for forecasting systematic risk of individual firms have been based on relatively uniformative prior knowledge about the cross sectional distribution of risk estimates this study introduces prior information in the form of size and industry based cross sectional distributions of risk estimates such information is incorporated into forecasts using familiar and generalized adjustment techniques the latter being based on recently developed multiple shrinkage methods improved forecast performance results

cross country differences in monetary policy execution and money market rates volatility abstract volatility patterns in overnight interest rates display differences across industrial countries that existing models designed to replicate the features of individual countries markets cannot account for this paper presents an equilibrium model of the overnight interbank market that matches cross country differences in patterns in interest volatility by incorporating differences in how central banks manage liquidity in response to shocks our model is consistent with central banks practice of rationing access to marginal facilities when the objective of stabilizing short term interest rates conflicts with another high frequency objective such as an exchange rate target

total price uncertainty and the theory of the competitive firm in the past ten years our understanding of the behaviour of the firm under uncertainty has developed rapidly 1 this has been due to research in two broad areas the sources of uncertainty in the firm s operations and the pricing of that uncertainty by the firm s stockholders in the first area baron 1968 sandmo 1971 leland 1972 and batra and ullah 1974 have all examined the impact of price uncertainty blair 1974 holthausen 1976 and hartman 1976 the impact of factor cost uncertainty and hartman 1972 turnovsky 1973 and epstein 1978 the extent to which technological flexibility affects the impact of price and cost uncertainty these original contributions have invariably assumed that the objective of the firm is to maximize a shareholder s expected utility function this approach implicitly assumes that the price of risk is affected by the firm s decision and thus that the firm is a monopolist in the financial market that allocates risk concurrent with this literature has been the development of theories of market valuation under uncertainty arrow 1971 debreu 1959 and hirshleifer 1970 have developed the time state preference model tsp and sharpe 1964 and lintner 1965 the capital asset pricing model cap to provide a specification of the firm s market value under uncertainty hence if the equilibrium assumptions of either model hold the managers of the firm can maximize shareholder utility by maximizing an objective market value of the firm then as hite 1978 and nielsen 1975 have shown the theory of the firm under uncertainty is formally identical to the theory of the firm under certainty the only difference is that the certainty value is replaced by the certainty equivalent value determined from the equilibrium valuation equation unfortunately it is not realistic to assume that markets are either complete or perfect the most obvious incompleteness is the lack of full commodity markets some commodity markets do exist however the firm cannot remove technology or wage risk the result is that stock markets exist to allocate residual income risk whereas in a complete market all of the components of that risk would have their own commodity market thus making the stock 2 market redundant hence this paper will consider the joint interaction of total price uncertainty that is product price and factor cost uncertainty in a model where there is only a stock market to allocate residual income risk moreover we will allow the completeness of this residual income market to vary to examine its impact on the firm s operating decisions this paper can therefore be considered a synthesis and generalization of previous work in this area

economic development technological change and growth the growth spiral money energy and imagination in the dynamics of the market processhans christoph binswanger new york and heidelberg springer 2013 pp xii 165 isbn 978 3 642 31880 1 jel 2013 0583

union organizing activity firm growth and the business cycle this paper analyzes the relationship between changes in unionization and firm growth average growth is significantly low er in manufacturing firms that experience successful union elections bu t these strong effects are largely illusory the authors find no evidence of a significant relationship between unionization and firm growth despite a strong cyclical pattern in election activity thei r results suggest that the significant negative effect of organizing activity on a firm s market value is not accompanied by any growth changes the authors therefore cannot reject the hypothesis that t he equity losses from union election activity represent a simple transf er of wealth from shareholders to workers copyright 1993 by american economic association

tests of alternative wage employment bargaining models with an application to the uk aggregate labour market abstract in this paper we propose a test that discriminates among alternative models of bargaining for wages and employment the test rests on a theoretical framework which encompasses both the labour demand and the efficient bargain models of wage and employment determination it is based on testing the cross equation restrictions implied for the coefficients of union power variables in reduced form wage and employment equations the test is illustrated for the layard and nickell model of the aggregate uk labour market for which it is found that one can reject both the labour demand model and the hypothesis that wage employment bargains are efficient in favour of a generalised model of inefficient bargaining for wages and employment

union firm bargaining and the influence of product market power and production technology on systematic risk the relationship between the capm firm beta and the firm s microeconomic decisions is studied by a model under uncertainty which combines the feature of an ex ante inputs substituable production technology and the existence of a union which bargains over various economic dimensions of the firm it is shown that the earlier findings of a relationship between the firm beta the firm product market power and the labor capital ratio may be reinforced through the indirect channel of labor market bargaining but the relationship becomes more complex and heavily depends on the scope of the union firm bargaining process this yields the empirical prediction confirmed for a panel of belgian firms that any proper estimation of the determinants of firm beta must control for firms in the sample being unionized

the impact of the degrees of operating and financial leverage on systematic risk of common stock the capital asset pricing model postulates that the equilibrium return on any risky security is equal to the sum of the risk free rate of return and a risk premium measured by the product of the market price of risk and the security s systematic risk in the capital asset pricing model beta as an index of systematic risk is the only security specific parameter that affects the equilibrium return on a risky security

unionization and profitability evidence from the capital market this paper examines the effect of unionization on the profitability of firms abnormal monthly common stock returns for a sample of 253 nyse listed firms are estimated for the month in which the union petitions for an election and for the month in which the national labor relations board certifies the election outcome the results suggest that unionization on average is associated with a reduction in equity value when unions win an election the average loss associated with the unionization drive is 3 8 percent of equity value when unions lose an election there is an average net reduction of 1 3 percent in the equity value of the firm

bargaining power fear of disagreement and wage settlements theory and evidence from u s industry the paper develops and estimates a theoretical model of wage determination and union nonunion wage differentials in order to overcome the institutional ctiticisms of the formal bargaining literature the paper generalizes the nash zeuthen harsanyi model by linking the solution to the institutional concepts of bargaining power and fear or cost of disagreement and by making the outcome depend not only on endogenous but also on exogenous factors an operational specification of bargaining power and fear of disagreement allows the model to be estimated with data covering twelve companies and trade unions during the period from mid 1950 s to the late 1970 s while giving limited support to the nashzeuthen harsanyi solution the empirical analysis indicates that the bargaining outcome usually deviates from the nash zeuthen harsanyi point and in accordance with the institutionalist claim that it varies significantly with exogenous factors contrary to the traditional labor economics view the results do not support the general conclusion that the bargaining solution lies on the marginal revenue product curve of labor instead the relevant coefficients suggest that for many firms and unions the outcome might be better characterized by the efficient contract vertical contract curve

union firm efficient bargaining and test of oligopolistic conduct this paper applies a production function approach to the analysis of imperfection in product and factor markets and develops a test of efficient bargaining for wage and employment determination based on a translog function defined at the firm level estimates for the belgian chemical industry are consistent with the existence of product market power which is significantly eroded by union wage rents

why capital hires labor a bargaining perspective organizational forms often serve as vehicles for the appropriation of quasi rent capitalist firms typically emerge when production requires noncontractible investments in specific physical assets because worker control would divert quasi rents away from ass et owners ex post conversely labor managed firms tend to emerge in niches requiring specialized human capital but general purpose physi cal assets a key result is that capitalist firms can persist in competitive markets even when labor managed firms would yield a larg er total surplus copyright 1993 by american economic association

bargaining power and wage employment contracts in a unionized industry input and output data are used in conjunction with negotiated wages and employment to estimate a fully specified bargaining model between a labour union the international woodworkers of america and representatives from the british columbia wood products industry bargaining powers are modelled as functions of exogenous variables believed to have influenced the parties relative strike costs the estimated bargaining powers are plotted over time and compared to the proportion of rents captured by each party parameters of the union utility function and the firms technology are also estimated and hypothesis tests are conducted on various aspects of the model there are still relatively few studies in which fully specified models of bargaining between labour unions and firms are estimated this reflects both the extensive data requirements and the complexity of the models involved a fully specified model includes a representation of the firms objectives and technological constraints the union s goals and constraints and the bargaining structure furthermore even when micro data are available usually more than two parties are involved i e firms will negotiate with several unions and each union will have to deal separately with the many firms operating within the industry this complicates the modelling of the bargaining setting considerably in this study data on the wood products industry in british columbia canada are analyzed during the period under study 1963 1983 negotiations in this industry were highly centralized in fact the bargaining setting can be described as a bilateral monopoly between the international woodworkers of america iwa a powerful and stable union and the forest industrial relations an employer association representing firms in the industry this data set includes information on outputs and nonlabour inputs thus allowing the calculation of profits and the joint determination of output and other inputs along with employment and wages a structural model with four dependent variables wages employment output and a materials and supplies input is estimated firms are assumed to maximize profits and union objectives are modelled by a ces utility function with employment and the difference between union wages and alternative wages as arguments given a representation for the firms technology and the union preferences a

the effect of wage bargains on the stock market value of the firm the author estimates the change in the value of common stock resulting from an unexpected change in collectively bargained labor costs using bargaining unit wage data and nyse stock returns he estimates a dollar for dollar trade off between these variables this result is consistent with stock valuations based on present value maximizing managerial decisions that is the results are consistent with hotelling s lemma the author also finds support for the hypothesis that collective bargains maximize the sum of shareholder and union member wealth that is the results are consistent with strong efficiency in the contracting environment copyright 1989 by american economic association