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Learning in Sequential Wage Negotiations: Theory and Evidence

Listed author(s):
  • Kuhn, Peter
  • Gu, Wulong

When union-firm pairs bargain sequentially, and when unobserved components of firms' abilities to pay are subject to correlated shocks, unions that bargain later in a sequence can acquire valuable information by observing previous bargaining outcomes in their industry. The authors derive the implications of this kind of learning in an asymmetric information model of wage negotiations and argue that the most robust implication is a lower incidence of strikes among 'followers' than 'leaders' in wage negotiations. Considerable empirical support for this implication is found in a long panel of Canadian contract negotiations. Copyright 1999 by University of Chicago Press.

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File URL: http://dx.doi.org/10.1086/209915
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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 17 (1999)
Issue (Month): 1 (January)
Pages: 109-140

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Handle: RePEc:ucp:jlabec:v:17:y:1999:i:1:p:109-40
Contact details of provider: Web page: http://www.journals.uchicago.edu/JOLE/

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  1. Harrison, Alan & Stewart, Mark, 1989. "Cyclical Fluctuations in Strike Durations," American Economic Review, American Economic Association, vol. 79(4), pages 827-841, September.
  2. Susan Vroman, 1982. "The Direction of Wage Spillovers in Manufacturing," ILR Review, Cornell University, ILR School, vol. 36(1), pages 102-112, October.
  3. Drew Fudenberg & Jean Tirole, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 50(2), pages 221-247.
  4. David Card, 1987. "Longitudinal Analysis of Strike Activity," NBER Working Papers 2263, National Bureau of Economic Research, Inc.
  5. Fethke, Gary & Policano, Andrew J, 1990. "Information Incentives and Contract Timing Patterns," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(3), pages 651-665, August.
  6. Gunderson, Morley & Kervin, John & Reid, Frank, 1986. "Logit Estimates of Strike Incidence from Canadian Contract Data," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 257-276, April.
  7. Linda Babcock & Xianghong Wang & George Loewenstein, 1996. "Choosing the Wrong Pond: Social Comparisons in Negotiations That Reflect a Self-Serving Bias," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 1-19.
  8. Oliver Hart, 1989. "Bargaining and Strikes," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 25-43.
  9. Anat R. Admati & Motty Perry, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 345-364.
  10. Joseph S. Tracy, 1986. "An Empirical Test of an Asymmetric Information Model of Strikes," NBER Working Papers 1870, National Bureau of Economic Research, Inc.
  11. Oswald, Andrew J, 1979. "Wage Determination in an Economy with Many Trade Unions," Oxford Economic Papers, Oxford University Press, vol. 31(3), pages 369-385, November.
  12. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
  13. Frank, Robert H, 1984. "Are Workers Paid Their Marginal Products?," American Economic Review, American Economic Association, vol. 74(4), pages 549-571, September.
  14. McConnell, Sheena, 1989. "Strikes, Wages, and Private Information," American Economic Review, American Economic Association, vol. 79(4), pages 801-815, September.
  15. Burgess, Simon M, 1988. "Wage Rigidity and Information: Relativities and Target Rates of Wage Growth," Oxford Economic Papers, Oxford University Press, vol. 40(3), pages 523-534, September.
  16. Kennan, John & Wilson, Robert, 1989. "Strategic Bargaining Models and Interpretation of Strike Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages 87-130, Supplemen.
  17. Otto Eckstein & Thomas A. Wilson, 1962. "The Determination of Money Wages in American Industry," The Quarterly Journal of Economics, Oxford University Press, vol. 76(3), pages 379-414.
  18. Hayes, Beth, 1984. "Unions and Strikes with Asymmetric Information," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 57-83, January.
  19. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-497, June.
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