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Union-firm bargaining: Order of play and efficiency

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  • Appelbaum, Elie

Abstract

This paper shows that a modified alternating offers Rubinstein model can 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 parties 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. The equilibrium wage is, therefore, unique. In the second example, we examine a two-part-tariff alternating offers bargaining protocol, where the parties 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.

Suggested Citation

  • Appelbaum, Elie, 2011. "Union-firm bargaining: Order of play and efficiency," Games and Economic Behavior, Elsevier, vol. 71(2), pages 235-245, March.
  • Handle: RePEc:eee:gamebe:v:71:y:2011:i:2:p:235-245
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    References listed on IDEAS

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