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Strikes and Holdouts in Wage Bargaining: Theory and Data

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Abstract

We develop a private-information model of union contract negotiations in which disputes signal a firm's willingness to pay. Previous models have assumed that all labor disputes take the form of a strike. Yet a prominent feature of U.S. collective bargaining is the holdout: negotiations often continue without a strike after the contract has expired. Production continues with workers paid according to the expired contract. We analyze the union's decision to strike or hold out and highlight its importance to strike activity. Strikes are more likely to occur after a drop in the real wage or a decline in unemployment.

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File URL: http://www.cramton.umd.edu/papers1990-1994/92aer-strikes-and-holdouts.pdf
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Bibliographic Info

Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 92aer.

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Length: 22 pages
Date of creation: 1992
Date of revision: 09 Jun 1998
Publication status: Published in American Economic Review, 82:1, March 1992, pages 100-121. Reprinted in Bengt Holmstrom, Paul Milgrom, and Alvin E. Roth, eds., Game Theory in the Tradition of Bob Wilson, Berkeley Electronic Press, www.bepress.com/wilson, May 2002.
Handle: RePEc:pcc:pccumd:92aer

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Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
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Web page: http://www.cramton.umd.edu

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Keywords: Bargaining; Signaling; U.S. Wage Negotiations;

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References

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  1. Bruce E. Kaufman, 1981. "Bargaining theory, inflation, and cyclical strike activity in manufacturing," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 34(3), pages 333-355, April.
  2. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  3. Roth, Alvin E & Murnighan, J Keith & Schoumaker, Francoise, 1988. "The Deadline Effect in Bargaining: Some Experimental Evidence," American Economic Review, American Economic Association, vol. 78(4), pages 806-23, September.
  4. McConnell, Sheena, 1989. "Strikes, Wages, and Private Information," American Economic Review, American Economic Association, vol. 79(4), pages 801-15, September.
  5. Ashenfelter, Orley & Johnson, George E, 1969. "Bargaining Theory, Trade Unions, and Industrial Strike Activity," American Economic Review, American Economic Association, vol. 59(1), pages 35-49, March.
  6. Hart, Oliver, 1989. "Bargaining and Strikes," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 25-43, February.
  7. Cramton, Peter C, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 205-25, January.
  8. Raquel Fernandez & Jacob Glazer, 1989. "Striking for a Bargain Between Two Completely Informed Agents," NBER Working Papers 3108, National Bureau of Economic Research, Inc.
  9. David Card, 1988. "Strikes and Wages: A Test of a Signalling Model," NBER Working Papers 2550, National Bureau of Economic Research, Inc.
  10. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  11. Binmore, Ken & Osborne, Martin J. & Rubinstein, Ariel, 1992. "Noncooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 7, pages 179-225 Elsevier.
  12. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-37, May.
  13. Peter C. Cramton, 1991. "Dynamic Bargaining with Transaction Costs," Management Science, INFORMS, vol. 37(10), pages 1221-1233, October.
  14. Herbert R. Northrup, 1971. "The Railway Labor Act: A critical reappraisal," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 25(1), pages 3-31, October.
  15. Holden, S., 1990. "A Bargaining Theory Of Inflation," Memorandum 13/1990, Oslo University, Department of Economics.
  16. Gunderson, Morley & Kervin, John & Reid, Frank, 1986. "Logit Estimates of Strike Incidence from Canadian Contract Data," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 257-76, April.
  17. Harrison, Alan & Stewart, Mark, 1989. "Cyclical Fluctuations in Strike Durations," American Economic Review, American Economic Association, vol. 79(4), pages 827-41, September.
  18. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
  19. Haller, Hans & Holden, Steinar, 1990. "A letter to the editor on wage bargaining," Journal of Economic Theory, Elsevier, vol. 52(1), pages 232-236, October.
  20. Martin J. Mauro, 1982. "Strikes as a result of imperfect information," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(4), pages 522-538, July.
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