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Bargaining and the Timing of Investment

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  • Cripps, Martin W

Abstract

The joint determination of the timing of investment and wage bargaining is modeled. Two cases are considered: (1) there is an alternating-offer bargaining game over binding wage contracts and production is possible only when agreement is reached and (2) there are no binding contracts so revenue is divided in period-by-period bargaining postinvestment. Investment can occur earlier in case (2) than in case (1) and the equilibrium in case (2) can Pareto-dominate the equilibrium with binding contracts. These conclusions depend on players' discount factors. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Cripps, Martin W, 1997. "Bargaining and the Timing of Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 527-546, August.
  • Handle: RePEc:ier:iecrev:v:38:y:1997:i:3:p:527-46
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    Cited by:

    1. Adriana Breccia, 2006. "Sequential Bargaining in a Stochastic Environment," Discussion Papers 06/07, Department of Economics, University of York.
    2. Julia Müller & Thorsten Upmann, 2013. "Centralised Labour Market Negotiations," CESifo Working Paper Series 4470, CESifo Group Munich.
    3. Keshab Bhattarai, 2015. "Financial Deepening and Economic Growth in Advanced and Emerging Economies," Review of Development Economics, Wiley Blackwell, vol. 19(1), pages 178-195, February.
    4. Ahmet Ozkardas & Agnieszka Rusinowska, 2012. "Wage bargaining with discount rates varying in time under exogenous strike decisions," Documents de travail du Centre d'Economie de la Sorbonne 12013, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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