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A way of explaining unemployment through a wage-setting game

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  • Attila Tasnadi

Abstract

We investigate a duopsonistic wage-setting game in which the firms have a limited number of workplaces. We assume that the firms have heterogeneous productivity, that there are two types of workers with different reservation wages and that a worker's productivity is independent of his type. We show that equilibrium unemployment arises in the wage-setting game under certain conditions, although the efficient allocation of workers would result in full employment.

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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse14_2003.

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Length: 23
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:bon:bonedp:bgse14_2003

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
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Web page: http://www.bgse.uni-bonn.de

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Keywords: Unemployment; Bertrand-Edgeworth; wage-setting games;

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  1. THISSE, Jacques-François & ZENOU, Yves, . "Skill mismatch and unemployment," CORE Discussion Papers RP -1480, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Wauthy, Xavier & Zenou, Yves, 2002. " How Does Imperfect Competition in the Labor Market Affect Unemployment Policies?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 4(3), pages 417-36.
  3. Hamilton, Jonathan & Thisse, Jacques-Francois & Zenou, Yves, 2000. "Wage Competition with Heterogeneous Workers and Firms," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 453-72, July.
  4. Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
  5. Ching-to Albert Ma & Andrew M. Weiss, 1990. "A Signaling Theory of Unemployment," NBER Working Papers 3565, National Bureau of Economic Research, Inc.
  6. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  7. James B. Rebitzer & Lowell J. Taylor, 1991. "The Consequences of Minimum Wage Laws: Some New Theoretical Ideas," NBER Working Papers 3877, National Bureau of Economic Research, Inc.
  8. Gottfries, N. & Mccormick, B., 1990. "Discrimination And Open Unemployment In A Segmented Labour Market," Papers 460, Stockholm - International Economic Studies.
  9. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
  10. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  12. Simon, Leo K, 1987. "Games with Discontinuous Payoffs," Review of Economic Studies, Wiley Blackwell, vol. 54(4), pages 569-97, October.
  13. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
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