Incomplete Information Bargaining and Business Cycles
This paper presents a one-sided incomplete (asymmetric) information bargaining game between a firm and a worker embedded in a general equilibrium framework. The model predicts business cycle fluctuations in the economy in response to changes in aggregate productivity. The employment level in the model exhibits considerable fluctuations and persistence without the help of high values of the intertemporal elasticity of substitution and the real wage rate, although procyclical, fluctuates less than the marginal prodcut of labour. The forces leading to persistent fluctuations are seach and incomplete information. The latter effect is due to the dynamic nature of bargaining which makes the revelation of information gradual, thus spreading the effect of an adverse shock over a number of periods by inducing 'dynamic wage slugishness' and persistent job destruction. The paper also discusses efficiency issues: contracts are shown to be more efficient than bargaining for the purpose of wage determination. Secondly, the decentralised equilibrium does not exploit the informational externalities that exist in this economy and is inefficient in a second-best sense.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Mar 1993|
|Contact details of provider:|| Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp|
When requesting a correction, please mention this item's handle: RePEc:cep:stitep:259. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.