Costs of Negotiation and the Structure of Bargaining- A Note'

According to Horn and Wolinsky' s model on the patterns of unionization the workers' and the firm's interests with respect to the scope of unionization are always opposed to each other. Of course, transaction costs of bargaining can establish a region in which an encompassing union is more profitable for both parties. This note demonstrates that due to externalities of negotiations the range of this possibility is much lager than the difference of expected transaction costs.Series: Department of Economics Working Paper Serie