Bilateral monopoly in the shipbuilding industry: A study of wage-rate determination

The primary goal of this dissertation is to explicate the dynamic factors that influence the outcome of collective bargaining when a strong union with monopoly power over the supply of labor faces an employer exercising monopsony power over the demand for labor. A significant characteristic of the bilateral monopoly model is the indeterminacy of both the wage level and the quantity of labor employed. Each party sets bounds on the range of possible outcomes, but the final outcome is determined by the process of collective bargaining. The research methodology requires an examination of wage-rate determination in the U.S. shipbuilding industry with two different but equal approaches: (1) a historical case study of the 1985 wage settlement at Bath Iron Works, and (2) an econometric model of wage-rate determination. By including both qualitative and quantitative methods of research, a clearer picture emerges of how well the bilateral monopoly model explains the determination of wages in the shipbuilding industry. The case study focuses on the tactics and strategies which contribute to the enhancement or diminution of bargaining power throughout the collective bargaining process. The econometric model quantifies the wage settlements of individual union contracts and relates these to both local labor market conditions and the bargaining environment which prevailed during the life of the previous contract and during the bargaining period. The econometric model tests: (1) whether the negotiated changes in wages in the U.S. shipbuilding industry can be explained by the movement of economic variables over time; and (2) the extent to which local labor market forces, consumer price inflation, and bargaining environment affect wage settlements