the provincial Ministry of Health negotiates with a large nurses’ union or
when an association of NHL players negotiates with an organized group
of team owners. This situation is referred to as bilateral monopoly because
there is considerable market power on both sides of the labour market.
In situations of bilateral monopoly, the market outcome depends
importantly on the negotiating ability of the two parties. The firm (or
association of firms) would like to push the wage and employment below
the competitive levels, as shown in Figure 14-5. In contrast, the labour
union would like to raise the wage above the competitive level, as shown
in Figure 14-4. However, without knowing more about how the two
parties negotiate, and which things other than the wage are part of the
negotiation (such as benefits, hours, overtime, etc.), it is impossible to
make a clear prediction of the result. We address labour unions and the
process of collective bargaining later in the chapter.