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Efficiency and behavioral considerations in labor negotiations

  • Manfred Königstein

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

  • Marie-Claire Villeval

    (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon)

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.

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Paper provided by HAL in its series Post-Print with number halshs-00550466.

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Date of creation: 2010
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Publication status: Published, Journal of Economic Psychology, 2010, 31, 4, pp. 599-611
Handle: RePEc:hal:journl:halshs-00550466
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00550466
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  1. Fershtman, Chaim, 1990. "The importance of the agenda in bargaining," Games and Economic Behavior, Elsevier, vol. 2(3), pages 224-238, September.
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  6. In, Younghwan & Serrano, Roberto, 2004. "Agenda restrictions in multi-issue bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 385-399, March.
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  13. Sen, Amartya, 1988. "Freedom of choice : Concept and content," European Economic Review, Elsevier, vol. 32(2-3), pages 269-294, March.
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  15. Murnighan, J. Keith, 2008. "Fairness in Ultimatum Bargaining," Handbook of Experimental Economics Results, Elsevier.
  16. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, June.
  17. Inderst, Roman, 2000. "Multi-issue Bargaining with Endogenous Agenda," Games and Economic Behavior, Elsevier, vol. 30(1), pages 64-82, January.
  18. Eckel, Catherine C. & Grossman, Philip J., 2008. "Differences in the Economic Decisions of Men and Women: Experimental Evidence," Handbook of Experimental Economics Results, Elsevier.
  19. Michael Kosfeld & Armin Falk, 2006. "The Hidden Costs of Control," American Economic Review, American Economic Association, vol. 96(5), pages 1611-1630, December.
  20. Guth, Werner, 1995. "On ultimatum bargaining experiments -- A personal review," Journal of Economic Behavior & Organization, Elsevier, vol. 27(3), pages 329-344, August.
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  22. Rachel Croson & Uri Gneezy, 2009. "Gender Differences in Preferences," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 448-74, June.
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