How Does Kantian Optimization Matter in Union Bargaining Agenda?

ABSTRACT This paper examines union bargaining choices between RTM (right‐to‐manage) and EB (efficient bargaining) under Kantian optimization. We show that Kantian optimization constitutes a subgame perfect equilibrium, yielding higher firm profits and labor benefits than Nashian equilibrium, though potentially reducing consumer surplus. In Kantian optimization, the cooperation between the owners will hold the conventional belief that profits under RTM exceed those under EB, while the outputs under EB exceed those under RTM. But the workers' wages are reversed. The endogenous choice between the Kantian and Nash principles by firms and unions leads to higher wages and improves individual worker's welfare.