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Power or loss aversion? Reinterpreting the bargaining weights in search and matching models

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  • Ciccarone, Giuseppe
  • Giuli, Francesco
  • Marchetti, Enrico

Abstract

We show that in a modified Mortensen–Pissarides model the bargaining weights depend on the players’ loss-aversion parameters. These weights can hence be calibrated without resorting to an assessment of players’ bargaining powers, which have proved difficult to empirically establish.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 118 (2013)
Issue (Month): 2 ()
Pages: 375-377

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Handle: RePEc:eee:ecolet:v:118:y:2013:i:2:p:375-377

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Nash bargaining; Search and matching; Loss aversion;

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References

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  1. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  2. Dale T. Mortensen, 2005. "More on Unemployment and Vacancy Fluctuations," 2005 Meeting Papers 326, Society for Economic Dynamics.
  3. Mark Gertler & Antonella Trigari, 2006. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Computing in Economics and Finance 2006 525, Society for Computational Economics.
  4. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  5. Simon Gaechter & Eric J. Johnson & Andreas Herrmann, 2010. "Individual-level loss aversion in riskless and risky choices," Discussion Papers 2010-20, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  6. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  7. Jonathan Shalev, 1996. "Loss Aversion and Bargaining," Game Theory and Information 9606001, EconWPA, revised 18 Mar 1997.
  8. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers 460, Society for Economic Dynamics.
  9. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-48, December.
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Cited by:
  1. Giuseppe Ciccarone & Francesco Giuli & Enrico Marchetti, 2013. "Imperfect rationality, macroeconomic equilibrium and price rigidities," Departmental Working Papers of Economics - University 'Roma Tre' 0183, Department of Economics - University Roma Tre.

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