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Power or loss aversion? Reinterpreting the bargaining weights in search and matching models

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  • Ciccarone, Giuseppe
  • Giuli, Francesco
  • Marchetti, Enrico

Abstract

We show that in a modified Mortensen–Pissarides model the bargaining weights depend on the players’ loss-aversion parameters. These weights can hence be calibrated without resorting to an assessment of players’ bargaining powers, which have proved difficult to empirically establish.

Suggested Citation

  • Ciccarone, Giuseppe & Giuli, Francesco & Marchetti, Enrico, 2013. "Power or loss aversion? Reinterpreting the bargaining weights in search and matching models," Economics Letters, Elsevier, vol. 118(2), pages 375-377.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:2:p:375-377
    DOI: 10.1016/j.econlet.2012.11.034
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    References listed on IDEAS

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    1. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    2. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    3. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
    4. Jonathan Shalev, 2002. "Loss Aversion and Bargaining," Theory and Decision, Springer, vol. 52(3), pages 201-232, May.
    5. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    6. Simon Gächter & Eric J. Johnson & Andreas Herrmann, 2022. "Individual-level loss aversion in riskless and risky choices," Theory and Decision, Springer, vol. 92(3), pages 599-624, April.
    7. Mark Gertler & Antonella Trigari, 2009. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 38-86, February.
    8. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
    9. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
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    Cited by:

    1. Giuseppe Ciccarone & Francesco Giuli, 2013. "Imperfect rationality, macroeconomic equilibrium and price rigidities," Departmental Working Papers of Economics - University 'Roma Tre' 0183, Department of Economics - University Roma Tre.
    2. Ciccarone, Giuseppe & Giuli, Francesco & Marchetti, Enrico, 2019. "Macroeconomic equilibrium and nominal price rigidities under imperfect rationality," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 60-78.
    3. Giuseppe Ciccarone & Francesco Giuli & Enrico Marchetti, 2016. "Search frictions and labor market dynamics in a real business cycle model with undeclared work," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 62(3), pages 409-442, August.

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    More about this item

    Keywords

    Nash bargaining; Search and matching; Loss aversion;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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