Labor Conflicts and Inefficiency of Relationship-Specific Investments: What is the Judge's Role?
AbstractThis paper presents a model of litigation in the context of a labor contract. The main objective of our analysis is to determine whether and under which conditions it is efficient that the judiciary arbiters a labor conflict and how the judge's decision should be made in order to be optimal. We embed this idea by considering a relationship between an employer and his worker, in which they can make (non contractible) relationship-specific investments. The optimality here refers to the best investment incentives of the parties allowing to maximize the generated surplus. We derive conclusions about the judge's behavior giving right investment incentives and determine how the division of the surplus should vary depending on several economic and social parameters.
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Bibliographic InfoPaper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2007-04.
Date of creation: 2007
Date of revision:
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Labor Law; Litigation; Investment Incentives; Bargaining.;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
- K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-24 (All new papers)
- NEP-LAW-2007-02-24 (Law & Economics)
- NEP-REG-2007-02-24 (Regulation)
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