Wages and employment in a repeated game with revenue fluctuations
AbstractThis paper analyses wages and employment in a repeated game between a union and a firm. The parties cannot enter a binding contract, and revenue is fluctuating. It is shown that if discount factors are moderate, then the best sequence of wage rates and employments sustainable in a subgame perfect equilibrium and sharing the surplus in fixed proportions, has a more counter cyclical wage rate than the one sharing the surplus in the same proportions in each period. This result holds true whether the revenue shocks are i.i.d. or follows a Markov process with persistence.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 41 (1997)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/eer
Other versions of this item:
- Christian Schultz, 1995. "Wages and Employment in a Repeated Game with Revenue Fluctuations," Discussion Papers 95-01, University of Copenhagen. Department of Economics.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
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