Alternating Offers Union-Firm Bargaining: Order of Play and Efficiency
AbstractThis paper shows that the Rubinstein alternating offers model can be modified to provide a Pareto superior outcome in the context of the right-to-manage union-firm bargaining. Two examples of bargaining protocols that yield a superior outcome are provided. In the first example, the union and the firm engage in a game in which the order of play is determined as part of the bargaining. We show that the game has a unique subgame perfect equilibrium in which the firm always moves first in the wage bargaining game and the equilibrium wage is, therefore, unique. In the second example we examine a two-part-tariff alternating offers bargaining protocol, where the firm and the union bargain over the wage and transfer payments. We show that this bargaining protocol has a Pareto efficient, unique subgame perfect equilibrium. Thus, although the parties do not bargain over the level of employment, the outcome under this protocol is, nevertheless, “socially” optimal.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by York University, Department of Economics in its series Working Papers with number 2009_02.
Length: 17 pages
Date of creation: Feb 2009
Date of revision:
Union Wage premium; Efficient Bargaining; Right to Manage;
Find related papers by JEL classification:
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
- J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-05 (All new papers)
- NEP-BEC-2009-12-05 (Business Economics)
- NEP-GTH-2009-12-05 (Game Theory)
- NEP-LAB-2009-12-05 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, October.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- Oswald, Andrew J, 1982. "Trade Unions, Wages and Unemployment: What Can Simple Models Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 526-45, November.
- Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
- Oswald, Andrew J & Turnbull, Peter J, 1985. "Pay and Employment Determination in Britain: What Are Labour," Oxford Review of Economic Policy, Oxford University Press, vol. 1(2), pages 80-97, Summer.
- Elie Appelbaum, 2008. "Wages, Fringe Benefits and Efficiency in Union-Firm Bargaining," Working Papers 2008_04, York University, Department of Economics.
- Königstein, Manfred & Villeval, Marie Claire, 2005.
"The Choice of the Agenda in Labor Negotiations: Efficiency and Behavioral Considerations,"
IZA Discussion Papers
1762, Institute for the Study of Labor (IZA).
- Marie-Claire Villeval & Manfred Konigstein, 2005. "The Choice of the Agenda in Labor Negotiations: efficiency and behavioral considerations," Working Papers 0508, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
- Manfred Königstein & Marie-Claire Villeval, 2005. "The Choice of the Agenda in Labor Negotiations: Efficiency and Behavioral Considerations," Post-Print halshs-00175021, HAL.
- Manfred Königstein & Marie-Claire Villeval, 2005. "The Choice of the Agenda in Labor Negotiations: efficiency and behavioral considerations," Post-Print halshs-00180038, HAL.
- Oswald, Andrew J., 1993.
"Efficient contracts are on the labour demand curve : Theory and facts,"
Elsevier, vol. 1(1), pages 85-113, June.
- Oswald, A. J., 1995. "Efficient contracts are on the labour demand curve: Theory and facts," Labour Economics, Elsevier, vol. 2(1), pages 102-102, March.
- Andrew Oswald, 1984. "Efficient Contracts are on the Labour Demand Curve: Theory and Facts," Working Papers 555, Princeton University, Department of Economics, Industrial Relations Section..
- Booth, Alison L, 1993.
"Layoffs with Payoffs: A Bargaining Model of Union Wage and Severance Pay Determination,"
CEPR Discussion Papers
843, C.E.P.R. Discussion Papers.
- Booth, Alison L, 1995. "Layoffs with Payoffs: A Bargaining Model of Union Wage and Severance Pay Determination," Economica, London School of Economics and Political Science, vol. 62(248), pages 551-64, November.
- Frankel, David M., 1998.
Staff General Research Papers
11927, Iowa State University, Department of Economics.
- Booth,Alison L., 1994.
"The Economics of the Trade Union,"
Cambridge University Press, number 9780521464673, October.
- Besancenot, Damien & Vranceanu, Radu, 1999. "A trade union model with endogenous militancy: interpreting the French case," Labour Economics, Elsevier, vol. 6(3), pages 355-373, September.
- Elie Appelbaum, 2008. "Strategic Extremism: Bargaining with Endogenous Breakdown Probabilities and Order of Play," Working Papers 2008_07, York University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Support).
If references are entirely missing, you can add them using this form.