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Firm-Specific Skills, Wage Bargaining, and Efficiency

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  • Mumcu, Ayşe

Abstract

We study the bargaining relationship between a firm and its incumbent worker who possesses firm-specific human capital. We show that, in the contract renewal stage, the worker's ability to use his firm-specific skills strategically increases his bargaining power vis-a-vis the firm. The firm can threaten to fire the worker and hire a new inexperienced worker, but this threat is not always credible. Even though the bargaining takes place in an environment with perfect information, the game has inefficient equilibria where delays occur in real time.

Suggested Citation

  • Mumcu, Ayşe, 1999. "Firm-Specific Skills, Wage Bargaining, and Efficiency," MPRA Paper 1913, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:1913
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    File URL: https://mpra.ub.uni-muenchen.de/2474/1/MPRA_paper_2474.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bargaining; firm-specific skills;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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