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Intra Firm Bargaining and Shapley Values

Author

Listed:
  • Brügemann, Björn

    (Vrije Universiteit Amsterdam)

  • Gautier, Pieter A.

    (Vrije Universiteit Amsterdam)

  • Menzio, Guido

    (New York University)

Abstract

The paper revisits the problem of wage bargaining between a firm and multiple workers. We show that the Subgame Perfect Equilibrium of the extensive-form game proposed by Stole and Zwiebel (1996a) does not imply a profile of wages and profits that coincides with the Shapley values as claimed in their classic paper. We propose an alternative extensive-form bargaining game, the Rolodex Game, that follows a simple and realistic protocol and that, under some mild restrictions, admits a unique Subgame Perfect Equilibrium generating a profile of wages and profits that are equal to the Shapley values. The vast applied literature that refers to the Stole and Zwiebel game to give a game-theoretic foundation to the use of the Shapley values as the outcome of the bargain between a firm and multiple workers should instead refer to the Rolodex game.

Suggested Citation

  • Brügemann, Björn & Gautier, Pieter A. & Menzio, Guido, 2015. "Intra Firm Bargaining and Shapley Values," IZA Discussion Papers 9293, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9293
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    References listed on IDEAS

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    More about this item

    Keywords

    intra firm bargaining; Shapley value;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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