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Does bargaining matter in the small firm's matching Mmodel?

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  • L'Haridon, Olivier
  • Malherbet, Franck
  • Pérez-Duarte, Sébastien

Abstract

In this article, the authors use a stylized model of the labor market to investigate the effects of three alternative and well-known bargaining solutions. They apply the Nash, the Egalitarian and the Kalai-Smorodinsky bargaining solutions in the small firm’s matching model of unemployment. To the best of their knowledge, this is the first attempt that has been made to implement and systematically compare these solutions in search matching economies. Their results are twofold. First from the theoretical/methodological viewpoint, they extend a somewhat flexible search matching economy to alternative bargaining solutions. In particular, they prove that the Egalitarian and the Kalai -Smorodinsky solutions are easily implementable and mathematically tractable within search-matching economies. Second, their results show that even though the traditional results of bargaining theory apply in this context, they are generally qualitatively different and quantitatively weaker than expected. This is of particular relevance in comparison with the results established in the earlier literature.

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Bibliographic Info

Paper provided by HEC Paris in its series Les Cahiers de Recherche with number 938.

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Length: 40 pages
Date of creation: 07 Sep 2010
Date of revision:
Handle: RePEc:ebg:heccah:0938

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Postal: HEC Paris, 78351 Jouy-en-Josas cedex, France
Web page: http://www.hec.fr/
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Keywords: Search and matching models; Bargaining theory; Nash; Egalitarian; Kalai-Smorodinsky;

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Cited by:
  1. Bruno Jacquet & Etienne Lehmann & Bruno Van der Linden, 2011. "Optimal Redistributive Taxation with both Labor Supply and Labor Demand Responses," Working Papers, Centre de Recherche en Economie et Statistique 2011-15, Centre de Recherche en Economie et Statistique.
  2. Marcus Dittrich & Silvio Städter, 2014. "Moral Hazard and Bargaining over Incentive Contracts," CESifo Working Paper Series 4920, CESifo Group Munich.
  3. Laurence Jacquet & Etienne Lehmann & Bruno Linden, 2014. "Optimal income taxation with Kalai wage bargaining and endogenous participation," Social Choice and Welfare, Springer, Springer, vol. 42(2), pages 381-402, February.

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