Wage Negotiation Under Good Faith Bargaining
Abstract
We study the wage negotiation model of Haller and Holden (1990) and Fernandez and Glazer (1991) under the "Good Faith Bargaining" (GFB) rule, where a party may not demand more than it has previously demanded. The GFB rule significantly restricts feasible strategies, but at the same time, makes the game non-stationary and the analysis complicated. We introduce a state-dependent backward induction that generalizes Shaked and Sutton (1984) to characterize the equilibrium payoffs. We find that the GFB rule eliminates the union's credibility to strike. Without the strikes, the union's strategic opportunities during disagreement disappear, so that there is a unique equilibrium. This uniqueness contrasts sharply with the multiple equilibrium outcomes that obtain when no GFB rule is imposed.Download Info
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Bibliographic Info
Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.
Volume (Year): 09 (2007)
Issue (Month): 03 ()
Pages: 551-564
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Related research
Keywords: Bargaining; negotiation; good faith bargaining; 91A10; 91A25; 91A50;Find related papers by JEL classification:
- B4 - Schools of Economic Thought and Methodology - - Economic Methodology
- C0 - Mathematical and Quantitative Methods - - General
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D5 - Microeconomics - - General Equilibrium and Disequilibrium
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
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Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Schweinzer, Paul, 2010. "Sequential bargaining with common values," Journal of Mathematical Economics, Elsevier, vol. 46(1), pages 109-121, January.
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