Implementing endogenous inside options in Nash wage bargaining models
AbstractThe Rubinstein alternating-offers game shows that the threat point in Nash wage bargaining models should be the inside, instead of the outside, option. We provide a new way to implement inside options by explicitly modeling a utilitarian union's strike payoff. The solution to the dynamic bargaining system resulting from the endogeneity of the inside option can serve as a basis for richer, though still easily applicable, models of wage bargaining that are more in accordance with their game-theoretical underpinnings. The dynamics of the model also provide a theoretical justification for temporarily delayed labor market responses to policy changes.
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Bibliographic InfoArticle provided by Elsevier in its journal Mathematical Social Sciences.
Volume (Year): 57 (2009)
Issue (Month): 2 (March)
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Web page: http://www.elsevier.com/locate/inca/505565
Dynamic wage bargaining Labor unions Inside options;
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