Striking for a Bargain Between Two Completely Informed Agents
This paper models the wage-contract negotiation procedure between a union and a firm as a sequential bargaining process in which the union also decides, in each period, whether or not to strike for the duration of that period. We show that there exist subgame-perfect equilibria in which the union engages in several periods of strikes prior to reaching a final agreement, although both parties are completely rational and fully informed. This has implications for other inefficient phenomena such as tariff wars, debt negotiations, and wars in general. We characterize the set of equilibria, show that strikes can occur in real time, and discuss extensions of the model such as lockouts and the possibility of multiple recontracting opportunities.
|Date of creation:||Sep 1989|
|Date of revision:|
|Publication status:||published as American Economic Review, March 1991.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Ashenfelter, Orley & Johnson, George E, 1969. "Bargaining Theory, Trade Unions, and Industrial Strike Activity," American Economic Review, American Economic Association, vol. 59(1), pages 35-49, March.
- Henry S. Farber & Max H. Bazerman, 1989. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 99-120.
- Kennan, John, 1987. "The economics of strikes," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 2, chapter 19, pages 1091-1137 Elsevier.
- Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-31, May.
- Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
- Grossman, Sanford J. & Perry, Motty, 1986.
"Sequential bargaining under asymmetric information,"
Journal of Economic Theory,
Elsevier, vol. 39(1), pages 120-154, June.
- Sanford J. Grossman & Motty Perry, 1986. "Sequential Bargaining Under Asymmetric Information," NBER Technical Working Papers 0056, National Bureau of Economic Research, Inc.
- Oliver Hart, 1989. "Bargaining and Strikes," The Quarterly Journal of Economics, Oxford University Press, vol. 104(1), pages 25-43.
- Rubinstein, Ariel, 1985. "A Bargaining Model with Incomplete Information about Time Preferences," Econometrica, Econometric Society, vol. 53(5), pages 1151-72, September.
- Henry S. Farber & Max H. Bazerman, 1987. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes."," NBER Working Papers 2139, National Bureau of Economic Research, Inc.
- Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-64, November.
- Gul, Faruk & Sonnenschein, Hugo, 1988. "On Delay in Bargaining with One-Sided Uncertainty," Econometrica, Econometric Society, vol. 56(3), pages 601-11, May.
- Holden, S., 1989.
"Non-Cooperative Wage Bargaining,"
349, London School of Economics - Centre for Labour Economics.
- Rubinstein, Ariel, 1982.
"Perfect Equilibrium in a Bargaining Model,"
Econometric Society, vol. 50(1), pages 97-109, January.
- repec:oup:restud:v:54:y:1987:i:2:p:175-92 is not listed on IDEAS
- David Card, 1988. "Strikes and Wages: A Test of a Signalling Model," NBER Working Papers 2550, National Bureau of Economic Research, Inc.
- repec:oup:restud:v:54:y:1987:i:3:p:345-64 is not listed on IDEAS
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