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Bargaining theory of wages


A theory of the determination of wages which sees them as the outcome of a bargaining process between representatives of management and labour. It places primary emphasis on the analysis of the bargaining process, rather than on the general analysis of supply and demand for labour. Nevertheless, these two approaches are not incompatible, since we· can regard demand/supply conditions as establishing the general context within which bargaining takes place, and the bargaining process itself as being the means by which the equilibrium is attained.

Reference: The Penguin Dictionary of Economics, 3rd edt.