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Implementing endogenous inside options in Nash wage bargaining models

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  • Knabe, Andreas

Abstract

The 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 Info

Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 57 (2009)
Issue (Month): 2 (March)
Pages: 161-176

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Handle: RePEc:eee:matsoc:v:57:y:2009:i:2:p:161-176

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Web page: http://www.elsevier.com/locate/inca/505565

Related research

Keywords: Dynamic wage bargaining Labor unions Inside options;

References

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Cited by:
  1. Raduna, Daniela Viviana & Roman, Mihai Daniel, 2011. "Risk aversion influence on insurance market," MPRA Paper 37725, University Library of Munich, Germany, revised 01 Feb 2012.
  2. Matthias S. Hertweck, 2006. "Strategic Wage Bargaining, Labor Market Volatility, and Persistence," Economics Working Papers ECO2006/42, European University Institute.

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