This paper shows that with a strong labour union, bargaining over piece rate generates higher social welfare than bargaining over fixed wage. Moreover, this social welfare exceeds the social welfare under efficient bargaining level, if the union is very strong

If managers bargain with workers over wage before choosing output in a Cournot duopoly, owners face two conflicting interests in designing managerial incentives: one for profit orientation to reduce wage, and the other for sales orientation to gain in output competition. The net effect depends...