Outside Opportunities

It looks like the NHL season is going to be cancelled. Players are being urged to find another league to play in to keep up their games.

Absolute bargaining power, simply put, is the willingness and ability of a negotiator to walk away from negotiations. Relative bargaining power is the bargaining power of one negotiator compared to that of another negotiator. One of the determinants of relative (and absolute) bargaining power in negotiations between unions and firms are the outside opportunities of employers and employees. If the employees have alternative sources of income, that improves their bargaining power. If the employers can find resources to replace the workers or if they can take their capital resources and put them to use in some other productive capacity, that improves their bargaining power. We know the players have imperfect alternatives to the NHL. What do the owners have?

Well, the company that owns the Minnesota Wild has a lacrosse team (the Minnesota Swarm) that they are now fielding in the Xcel Energy Center (home of the Wild). It ain’t a perfect substitute and its owners are allowing anybody who bought a ticket to the first game to go to next Friday’s home game, but it is a substitute nonetheless.

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Author: Phil Miller

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