Suppose a UAW labor contract with General Dynamics is being

Suppose a UAW labor contract with General Dynamics is being renegotiated. Some of the many issues on the table include job security, health benefits, and wages. If you are an executive in charge of human resource issues at General Dynamics, would you be better off (a) letting the union bear the expense of crafting a document summarizing its desired compensation, or (b) making the union a take-it-or-leave-it offer? Explain.

Solution

In this case the better of will be b) making the union a take-it-or-leave-it offer.

Explanation:

This is because a take it or leave it offer will offer the union ample benefits such that they are better off than the alternative of turning down the contract. The expense of crafting the document is marginal.