Abstract

In this paper an integration is developed between the dynamic models formulated by the microeconomic theory of trade unions and the differential games approach. The resulting Nash differential game between firms and unionised workers describes the process of distributive conflict in a simplified capitalist economy. Moreover, the solutions of this dynamic game imply a cycle in the wage share of product and the employment rate. We then determine the Pareto efficient solution, and we show that the these trajectories are cyclical for the same parameter values of the Nash game; nonetheless these cycles are different from those derived from the noncooperative solution. These results are obtained by use of the Hopf theorem on local bifurcations.