Individually-Rational Union Membership
Paper number: 00/08
Paper date: April 2000
Paper Category: Working Paper
George Bulkley and Gareth D. Myles
The analysis of the determination of union membership has typically met difficulties with the fact that union membership is not individually rational and freeriding is the dominant strategy. We assume that workers differ in their reservation wages and hence in their preferred choice of contract, so preventing free-riding on the contract choice of others. This implies that joining a union is equivalent to buying a vote on the contract and provides an individual incentive to join the union. An equilibrium trade union membership is characterized in which membership is taken up by those with relatively “extreme” tastes. The union achieves a centralist objective even though no member precisely supports such a view.