Striking for a Bargain between Two Completely Informed Agents
This paper models the wage-contract negotiation procedure between a union and a firm as a sequential bargaining process in which the union must decide, in each period, whether or not to strike for the duration of that period. We show that there exist subgame-perfect equilibria in which the union engages in several periods of strikes prior to reaching a final agreement, although both parties are completely rational and fully informed. This has implications for other inefficient phenomena, such as tariff wars, debt negotiations, and wars in general. We characterize the set of equilibria, show that strikes can occur in real time, and discuss extensions of the model, such as lockouts and the possibility of multiple recontracting opportunities. Copyright 1991 by American Economic Association.
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Volume (Year): 81 (1991)
Issue (Month): 1 (March)
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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.:
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
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- Rubinstein, Ariel, 1985. "A Bargaining Model with Incomplete Information about Time Preferences," Econometrica, Econometric Society, vol. 53(5), pages 1151-1172, September.
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- Oliver Hart, 1989. "Bargaining and Strikes," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 25-43.
- Henry S. Farber & Max H. Bazerman, 1987. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes."," NBER Working Papers 2139, National Bureau of Economic Research, Inc.
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349, London School of Economics - Centre for Labour Economics.
- Kennan, John, 1987. "The economics of strikes," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 19, pages 1091-1137 Elsevier.
- 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.
- Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-1364, November.
- Henry S. Farber & Max H. Bazerman, 1989. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 99-120.
- Sanford J. Grossman & Motty Perry, 1986.
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0056, National Bureau of Economic Research, Inc.
- Grossman, Sanford J. & Perry, Motty, 1986. "Sequential bargaining under asymmetric information," Journal of Economic Theory, Elsevier, vol. 39(1), pages 120-154, June.
- David Card, 1988. "Strikes and Wages: A Test of a Signalling Model," NBER Working Papers 2550, National Bureau of Economic Research, Inc.
- Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
- Gul, Faruk & Sonnenschein, Hugo, 1988. "On Delay in Bargaining with One-Sided Uncertainty," Econometrica, Econometric Society, vol. 56(3), pages 601-611, May.
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