Anindya Sen

Wage bargaining, imperfect competition and the markup: Optimizing microfoundations

Abstract Combining the conjectural variations and Nash bargaining approaches it is shown that the demand-insensitive markup depends on the bargaining power of unions relative to owners of firms (in addition to more standard product market characteristics).

Union bargaining power, employment, and output in a model of monopolistic competition with wage bargaining

This paper examines the implications of a rise in the bargaining power of workers on the real wage, income distribution, and the levels of employment and output using a macroeconomic model with monopolistic competition and worker-owner Nash bargaining at the firm level. It thereby provides optimizing microfoundations to Kaleckis macroeconomic analysis of the positive effect on output of a rise in trade-union power, and contrasts it with the neoclassical view based on the diminishing marginal productivity of labor.

Entry and managerial incentives

Abstract This paper presents a two-period full-information model of entry where owners of incumbent and entrant firms endogenously select the incentive schemes for their managers. It is shown that when output decisions are delegated to managers, the incumbents owner chooses to base incentive schemes only partly on profit. But if output decisions are reached via Nash bargaining between managers, the incumbents owner will base the reward on profit alone. The entrant never bases the incentive scheme solely on profit. If there is a sufficiently high fixed cost of entry, then the incumbent can deter entry by providing management with appropriate incentive schemes.

The choice of organizational form in strategic contexts

Abstract This paper analyses the choice of organizational forms in strategic contexts. A simple duopoly model is considered where a capitalistic firm interacts with a firm in which decisions are reached via bargaining between workers and owner-managers. It is shown that various factors like the bargaining power of workers, their attitudes towards risk, the sequence of moves etc. can influence the choice of organizational form.

The structure of firms

Abstract This paper studies different organizational forms within a single framework. The U-form is modelled as a two-round communication game between a principal and agents with unobservable efforts and adverse selection problems. The M-form is modelled by considering a one-round communication game with pure adverse selection. Feasible and optimal mechanisms are characterized. The profit functions are derived and an extension of Hotellings Lemma proved. In the absence of the control loss problems flowing form the unobservability of agent effort levels, the U-form will be superior to the M-form. Both forms will be superior to the Corrupted M-form.

Cournot oligopoly with bargaining

Abstract The generalized Nash bargaining solutions is used to model output decisions of rival firms in a Cournot oligopoly. Expressions for price-cost margins and the objective function that a Cournot equilibrium implicitly maximizes, are obtained. As compared with the situation where firms maximize profits, these are shown to involve additional cost terms.