First Mover Advantage Sample Clauses

First Mover Advantage. If all parties discount factor are the same, first mover obtains greater payoff. However if the level of patience is close to 1, the share each gets is very close to half. Before we talk about how the effect of union wage differential is measured and possible complications, let’s examine how the impact permeates through the economy. Because we are considering essentially two segments it hints that a general equilibrium model would give the relevant insight. We will adopt the following assumptions 1. There are two sectors, A and B 2. All workers are homogenous 3. There is a large number of firms and workers such that labor market is competitive. Let this competitive wage be wc , with employment Lc . Let a union organize workers in sector A such that they are able to obtain wages of wu , thereby decreasing the equilibrium level of employment to Lu . Workers who are unable to find work in sector A now search for jobs in sector B. This then raises labor supply in sector B, reducing wages, and raising employment there hence, but note that the increase in employment in B will be less than the fall in employment in sector A. This is because individuals who find the new wage below their reservation wage now drop out of the labor market. Diagrammatically, Sector A Sector B Total Union Wage Effect wc ' ▇▇ Note that the total union wage effect is greater than what you would have noted from just focusing on sector A. In truth, the magnitude of the union effect depends on 1. the elasticity of labor demand in each sector, 2. the ability of the union to raise wages in the organized sector, and 3. the elasticity of supply.