The Structure of Firm-Specific Labour Unions

We apply a model with two types of labour where each group decides on whether it prefers to be represented by an independent craft-specific labour union or by a joint union. Applying the asymmetric Nash bargaining solution, we find that it is beneficial for at least one group of labourers to form its own independent union – and in some cases even both groups are worse off under a joint union. Consequently, a joint union must be considered as a rather unstable institution. Correspondingly, profits are lower if the firm bargains with two independent craft unions.