Wage bargaining and employment revisited: separability and efficiency in collective bargaining*

We analyse the two-dimensional Nash bargaining solution (NBS) by deploying standard labour market negotiations model of McDonald and Solow. show that problem can be decomposed into two one-dimensional problems, such solutions together replicate if NBS is applied. The axiom “independence irrelevant alternatives” shown to crucial for this type decomposability. This result has significant implications actual because it allows decomposition a multi-dimensional problems – thus helps facilitate real-world negotiations.