Union-Firm Bargaining and the Influence of Output Market Power and Production Technology on the Firm Systematic Risk
The relationship between the CAPM firm Beta and the firm’s microeconomic decisions is by a model under uncertainty, which combines the feature of an ex ante ‘inputs substituable’ production technology and the existence of a specific union which may bargain over different economic dimensions of the firm. It is shown that the earlier findings of a relationship between the firm Beta and such variables like the labor-capital ratio may be reinforced through the indirect channel of labor market bargaining, although the relationship heavily depends on the timing and scope of the union-firm bargaining process.