The United Mine Workers (UMW) and the Association of Coal Producers are attempting to negotiate a new contract in which the issues at stake are a wage increase, the introduction of a right-to- strike clause, and a proposal that nonmining jobs at sites be opened up to nonunion workers. Each $1.00 increase in the hourly wage would raise the association's total wage bill by $40 million. Besides the wage issue, the UMW feels very strongly about the right-to-strike clause; in fact, it would be willing to give up $.75 in wage increases to secure it. It feels less strongly about reserving nonmining work for the union and is willing to give up only $.50 in wages to retain this provision. For its part, the association has attempted to calculate the impact of each of these provisions. It judges that accepting the right- to-strike clause might increase its costs by $50 million in the long run and that opening site work to nonunion labor would save it $60 million.

a. Under an efficient agreement, how should the parties decide the right-to-strike and reserved-work issues?

b. As a variation on this example, suppose the current administration in Washington has invoked emergency legislation to freeze mining wages (as well as other prices and wages in the economy). The result is that the right-to-strike and reserved-work clauses are the only issues under negotiation; any wage change is prohibited. Now how should the parties decide these issues to mutual advantage?