Profit sharing and strike activity in Cournot oligopoly

Within an incomplete-information framework. we develop a model of wage dete rmination in a unionized Cournot oligopoly. The assumption of incomplete in formation allows the possibility of strikes or lockouts, which waste indust ry potential resources, at equilibrium. Facing such deadweight loss, the go vernment or the social planner may decide to adopt a policy, such as a prof it-sharing scheme. Under two different bargaining structures (firm level vs . industry level), we investigate the effects of adopting profit sharing on the wage outcome and the strike activity. If the base-wage bargaining take s place at the industry level, then the introduction of a profit-sharing sc heme increases the strike activity. But if the base-wage bargaining takes p lace at the firm level and the number of firms in the industry is greater t han two, then the introduction of a profit-sharing scheme reduces the strik e activity.