Delegation, union leaders and capital Allocation

This paper looks upon the effects of delegation of the bargaining process within unions. It investigates the allocation of capital when investment is sunk and there is an absence of binding contracts. Although capital investment is inefficient, capital allocation can be improved by precommitment. Strong union members precommit by hiring a weak leader, whilst weak union members hire a strong union leader. Governments can increase the efficiency of capital by reducing the intrinsic union strength, but could reduce the efficiency of capital if intrinsic internal union leader strength is reduced.