International monopoly union coordination under the presence of externalities and costs

Despite the advantages of holding monopoly power, unions rarely coordinate their wage demands across countries. In this paper, I argue that the costs of coordination and externalities can explain such behaviour. In the model, monopolistic unions set the wage in each country, and the firm keeps the right-to-manage. If the domestic union raised its wage, the firm would substitute production of the domestic good for the foreign one, reducing employment. The union would be worse off and it would have no incentives to deviate. Upon coordination, unions can raise the wage, share the loss of employment, and be better off. Two extensions are provided: right-to-manage model and differentiated costs of coordination.