The Kalai-Smorodinsky Solution in Labor-Market Negotiations
AbstractAuthors who consider efficient bargaining on the labor market predominantly focus on the Nash-bargaining solution. It seems, however, that actual labor market negotiations between an employers’ federation and a labor union are often characterized by mutual concessions, which may be accounted for by an application of the Kalai-Smorodinsky solution to labor-market negotiations. Correspondingly, we investigate how a government can influence the equilibrium on the labor market by changing the reservation wage when the equilibrium is determined by the Kalai-Smorodinsky solution. We find that the induced employment effects may differ substantially when compared with the Nash bargaining solution. Hence, substituting the Kalai-Smorodinsky by the Nash bargaining solution is not innocuous, when actual negotiations are characterized by mutual incremental concessions.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 941.
Date of creation: 2003
Date of revision:
labor market negotiations; Kalai-Smorodinsky solution; Nash-bargaining solution; reservation wage; fiscal and social policies;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-02 (All new papers)
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