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Multiple equilibria in a firing game with impartial justice

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  • Besancenot, Damien
  • Vranceanu, Radu

Abstract

In this paper, we argue that firms' firing strategies and the judicial strategy of dismissed employees depend to a large extent on labor judges' ability to shed light on the various cases. The model is cast as a sequential game with imperfect information featuring firms, employees and labor judges. The judges' error margin increases with the congestion of the judicial system. The game presents multiple equilibria which differ in the frequency of good workers fired for unfair motives and the frequency of unreliable workers who abusively sue firms for unfair dismissal. The probability that the judge sits with the employee appears to be positively related to the ratio between the severance payment for economic dismissal and the company fine for abusive dismissal.

Suggested Citation

  • Besancenot, Damien & Vranceanu, Radu, 2009. "Multiple equilibria in a firing game with impartial justice," Labour Economics, Elsevier, vol. 16(3), pages 262-271, June.
    • Handle: RePEc:eee:labeco:v:16:y:2009:i:3:p:262-271
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    1. Goerke, Laszlo & Pannenberg, Markus, 2010. "An economic analysis of dismissal legislation: Determinants of severance pay in West Germany," International Review of Law and Economics, Elsevier, vol. 30(1), pages 71-85, March.
    2. Besancenot, Damien & Vranceanu, Radu, 2009. "Multiple equilibria in a firing game with impartial justice," Labour Economics, Elsevier, vol. 16(3), pages 262-271, June.
    3. Damien Besancenot & Nicolas Sirven & Radu Vranceanu, 2018. "A model of hospital congestion in developing countries," Working Papers hal-01791106, HAL.
    4. Cahuc, Pierre & Malherbet, Franck & Prat, Julien, 2019. "The Detrimental Effect of Job Protection on Employment: Evidence from France," IZA Discussion Papers 12384, Institute of Labor Economics (IZA).
    5. repec:got:cegedp:87 is not listed on IDEAS
    6. Besancenot Damien & Faria João R. & Huynh Kim V., 2014. "Congestion of Academic Journals Under Papers’ Imperfect Selection," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(3), pages 1145-1167, July.
    7. Damien Besancenot & Joao R. Faria & Kim Van Huynh, 2009. "Congestion in academic journals under an impartial selection process," Working Papers halshs-00382585, HAL.
    8. Baumann, Florian & Friehe, Tim, 2012. "On the evasion of employment protection legislation," Labour Economics, Elsevier, vol. 19(1), pages 9-17.
    9. Fraisse, H. & Kramarz, F. & Prost, C., 2009. "Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL," Working papers 256, Banque de France.

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    More about this item

    Keywords

    EPL Labor judges Congestion Firing costs Layoff motive Multiple equilibria;

    JEL classification:

    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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