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Efficient Wage Bargaining as a Repeated Game


  • Maria Paz Espinosa
  • Changyong Rhee


This paper builds a bridge between the two existing approaches for wage and employment determination in a unionized market: the monopoly union model and the efficient bargaining model. Both fail to capture the dynamic aspects of wage bargaining. When the repeated nature of the wage bargaining process is considered, the equilibria are neither as inefficient as the monopoly union model predicts nor as fully efficient. Rather, the two models can be regarded as particular cases with certain discount rates. We apply our model to issues such as the endgame interpretation of the U. S. steel industry, wage concessions, and featherbedding.

Suggested Citation

  • Maria Paz Espinosa & Changyong Rhee, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 565-588.
  • Handle: RePEc:oup:qjecon:v:104:y:1989:i:3:p:565-588.

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    References listed on IDEAS

    1. Shleifer, Andrei & Vishny, Robert W, 1988. "The Efficiency of Investment in the Presence of Aggregate Demand Spillovers," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1221-1231, December.
    2. Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December.
    3. Oliver Hart, 1982. "A Model of Imperfect Competition with Keynesian Features," The Quarterly Journal of Economics, Oxford University Press, vol. 97(1), pages 109-138.
    4. Douglass C. North, 1959. "Agriculture in Regional Economic Growth," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 41(5), pages 943-951.
    5. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989. "Industrialization and the Big Push," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1003-1026, October.
    6. Russell Cooper & John Andrew, 1985. "Coordinating Coordination Failures in Keynesian Models," Cowles Foundation Discussion Papers 745R, Cowles Foundation for Research in Economics, Yale University, revised Jul 1985.
    7. Judd, Kenneth L, 1985. "On the Performance of Patents," Econometrica, Econometric Society, vol. 53(3), pages 567-585, May.
    8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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