Strike Threats and the Bargaining Power of Insiders

Abstract

A two-year period model consisting of a capitalist and an insider worker (who cannot be replaced) is introduced. During the first period the parties accumulate strategic stocks (inventory and strike fund, respectively) which can be used during a potential strike in the beginning of the second period. Each party then calculates the ex ante outcome of a strike and the costs of disagreement; with perfect information no strikes will occur. The conditions for the credibility of strike threats and the equilibrium wage proposals of the parties are derived. The bargaining power of the worker is shown to be positively related to the storage cost, fixed costs and the profitability of the firm. Copyright 1991 by The editors of the Scandinavian Journal of Economics.

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