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Efficiency and behavioral considerations in labor negotiations

Author

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  • Manfred Königstein

    (IZA - Institute for the study of labor - Institute for the Study of Labor - IZA, Universität Erfurt)

  • Marie Claire Villeval

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Experimental literature has shown that social preferences influence how individuals bargain and make sharing decisions. It usually considers situations in which individuals negotiate on a single issue. This paper explores a different environment and reports on an experiment based on a non-cooperative game in which the choice of the bargaining agenda is endogenous. We fnd that firms reveal a strong preference for single-issue bargaining although the subgame perfect equilibrium predicts the choice of the multi-issue bargaining. In multi-issue bargaining unions offer smaller relative payoff shares to firms than in single-issue bargaining and this leads to a higher conflict rate than in a single-issue bargaining. Social preferences and a concern for relative payoffs support this preference for a restricted bargaining agenda but they induce a loss of efficiency.

Suggested Citation

  • Manfred Königstein & Marie Claire Villeval, 2010. "Efficiency and behavioral considerations in labor negotiations," Post-Print halshs-00550466, HAL.
    • Handle: RePEc:hal:journl:halshs-00550466
    DOI: 10.1016/j.joep.2010.04.003
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00550466
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