
198 Chapter 8
at the same time, it has caused a fall in employment from OL
2
to OL
1
. Since union creates excess supply
of labour to the extent of JK = L
1
L
3
, and the unemployed labour (JK) would be prepared to work at a
wage rate lower than the union wage rate (W
2
), there is a possibility of wage cutting. But labour union
would not allow the unemployed to accept a lower wage rate. So a higher wage rate at OW
2
would
remain stable.
WAGE DETERMINATION UNDER BILATERAL MONOPOLY: THE
CASE OF COLLECTIVE BARGAINING
e case of a bilateral monopoly
6
is said to exist in the factor market when there is a single buyer (the
product monopolist being ...