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Multiple equilibria in a firing game with impartial justice

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  • Besancenot, Damien
  • Vranceanu, Radu

Abstract

In this paper, we argue that firms' firing strategies and the judicial strategy of dismissed employees depend to a large extent on labor judges' ability to shed light on the various cases. The model is cast as a sequential game with imperfect information featuring firms, employees and labor judges. The judges' error margin increases with the congestion of the judicial system. The game presents multiple equilibria which differ in the frequency of good workers fired for unfair motives and the frequency of unreliable workers who abusively sue firms for unfair dismissal. The probability that the judge sits with the employee appears to be positively related to the ratio between the severance payment for economic dismissal and the company fine for abusive dismissal.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 16 (2009)
Issue (Month): 3 (June)
Pages: 262-271

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Handle: RePEc:eee:labeco:v:16:y:2009:i:3:p:262-271

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

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Keywords: EPL Labor judges Congestion Firing costs Layoff motive Multiple equilibria;

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References

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  1. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February.
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  13. Damien Besancenot & Radu Vranceanu, 2008. "Multiple equilibria in a firing game with impartial justice," CEPN Working Papers halshs-00203176, HAL.
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Cited by:
  1. repec:hal:wpaper:halshs-00382585 is not listed on IDEAS
  2. Goerke, Laszlo & Pannenberg, Markus, 2009. "An economic analysis of dismissal legislation: Determinants of severance pay in West Germany," Center for European, Governance and Economic Development Research Discussion Papers 87, University of Goettingen, Department of Economics.
  3. Besancenot, Damien & Vranceanu, Radu, 2009. "Multiple equilibria in a firing game with impartial justice," Labour Economics, Elsevier, vol. 16(3), pages 262-271, June.
  4. Baumann, Florian & Friehe, Tim, 2012. "On the evasion of employment protection legislation," Labour Economics, Elsevier, vol. 19(1), pages 9-17.
  5. Fraisse, H. & Kramarz, F. & Prost, C., 2009. "Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL," Working papers 256, Banque de France.

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