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  • Disequilibrium in the WS-PS Model

Definition of the Bargaining Gap

The bargaining gap measures the percentage difference between the real wage that workers bargain for on the wage-setting curve (wWSw^{\text{WS}}) and the real wage that firms offer based on their profit-maximizing markup, as represented by the price-setting curve (wPSw^{\text{PS}}). It is calculated with the formula: bargaining gap≡wWS−wPSwPS\text{bargaining gap} \equiv \frac{w^{\text{WS}} - w^{\text{PS}}}{w^{\text{PS}}}

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References

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Economics

Economy

Introduction to Macroeconomics Course

Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ

The Economy 2.0 Macroeconomics @ CORE Econ

CORE Econ

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Learn After

  • Example Calculation of a 2% Bargaining Gap

  • Bargaining Gap as the Direct Cause of Inflation