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Aggregate Pattern of Time-Dependent Adjustment Rules, I: A Game-Theoretic Analysis of Staggered versus Synchronised Wage Setting

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  • Lau, Sau-Him Paul

Abstract

This paper studies the benefits of staggered wage setting in reducing strategic conflicts. It is shown that, when wage setters interact strategically and dynamically, they prefer moving alternatingly, because by doing so, they are able to commit temporarily not to offset the effects of each other's action. It is also shown that synchronization represents a better arrangement when agents are able to coordinate. These results are consistent with the presence of nonsynchronous and decentralized wage decisions in the United States and the United Kingdom and the presence of synchronous bargaining (in Shunto) and coordination in wage determination in Japan. Copyright 1996 by Royal Economic Society.

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  • Lau, Sau-Him Paul, 1996. "Aggregate Pattern of Time-Dependent Adjustment Rules, I: A Game-Theoretic Analysis of Staggered versus Synchronised Wage Setting," Economic Journal, Royal Economic Society, vol. 106(439), pages 1645-1658, November.
    • Handle: RePEc:ecj:econjl:v:106:y:1996:i:439:p:1645-58
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    Cited by:

    1. Lau, Sau-Him Paul, 2001. "Aggregate Pattern of Time-dependent Adjustment Rules, II: Strategic Complementarity and Endogenous Nonsynchronization," Journal of Economic Theory, Elsevier, vol. 98(2), pages 199-231, June.
    2. Lau, Sau-Him Paul, 1997. "A note on the Markov perfect equilibrium of a linear-quadratic alternating-move game," Economics Letters, Elsevier, vol. 57(1), pages 51-56, November.
    3. V. Bhaskar, 2002. "On Endogenously Staggered Prices," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 97-116.
    4. Jens-Peter Loy & Christoph Weiss, 2002. "Staggering and synchronisation of prices in a low-inflation environment: Evidence from German food stores," Agribusiness, John Wiley & Sons, Ltd., vol. 18(4), pages 437-457.
    5. Cahuc, Pierre & Kempf, Hubert, 1999. "Asynchronized multiperiod commitments and cycles," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 387-407, December.
    6. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050, Elsevier.

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