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Does bargaining matter in the small firm's matching Mmodel?

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  • L'Haridon, Olivier
  • Malherbet, Franck
  • Pérez-Duarte, Sébastien

Abstract

In this article, the authors use a stylized model of the labor market to investigate the effects of three alternative and well-known bargaining solutions. They apply the Nash, the Egalitarian and the Kalai-Smorodinsky bargaining solutions in the small firm’s matching model of unemployment. To the best of their knowledge, this is the first attempt that has been made to implement and systematically compare these solutions in search matching economies. Their results are twofold. First from the theoretical/methodological viewpoint, they extend a somewhat flexible search matching economy to alternative bargaining solutions. In particular, they prove that the Egalitarian and the Kalai -Smorodinsky solutions are easily implementable and mathematically tractable within search-matching economies. Second, their results show that even though the traditional results of bargaining theory apply in this context, they are generally qualitatively different and quantitatively weaker than expected. This is of particular relevance in comparison with the results established in the earlier literature.

Suggested Citation

  • L'Haridon, Olivier & Malherbet, Franck & Pérez-Duarte, Sébastien, 2010. "Does bargaining matter in the small firm's matching Mmodel?," HEC Research Papers Series 938, HEC Paris.
  • Handle: RePEc:ebg:heccah:0938
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    References listed on IDEAS

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    Cited by:

    1. Jacquet, Laurence & Lehmann, Etienne & Van der Linden, Bruno, 2011. "Optimal Redistributive Taxation with Both Labor Supply and Labor Demand Responses," IZA Discussion Papers 5642, Institute for the Study of Labor (IZA).
    2. Dittrich, Marcus & Städter, Silvio, 2015. "Moral hazard and bargaining over incentive contracts," Research in Economics, Elsevier, vol. 69(1), pages 75-85.
    3. Laurence Jacquet & Etienne Lehmann & Bruno Linden, 2014. "Optimal income taxation with Kalai wage bargaining and endogenous participation," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(2), pages 381-402, February.
    4. repec:eee:ejores:v:262:y:2017:i:3:p:1064-1071 is not listed on IDEAS

    More about this item

    Keywords

    Search and matching models; Bargaining theory; Nash; Egalitarian; Kalai-Smorodinsky;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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