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Wage Bargaining with Time-Varying Threats

We study wage bargaining in which the union is uncertain about the firm's willingness to pay and threat payoffs vary over time. Strike payoffs change over time as replacement workers are hired, as strikers find temporary jobs, and as inventories or strike funds run out. We find that bargaining outcomes are substantially altered if threat payoffs vary. If dispute costs increase in the long-run, then dispute durations are longer, settlement rates are lower, and wages decline more slowly during the short-run (and may even increase). The settlement wage is largely determined from the long-run threat, rather than the short-run threat.

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File URL: http://www.cramton.umd.edu/papers1990-1994/94jole-wage-bargaining-with-time-varying-threats.pdf
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Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 94jolew.

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Length: 24 pages
Date of creation: 1994
Date of revision: 09 Jun 1998
Publication status: Published in Journal of Labor Economics, 12:4, October 1994, pages 594-617.
Handle: RePEc:pcc:pccumd:94jolew
Contact details of provider: Postal: Economics Department, University of Maryland, College Park, MD 20742-7211
Phone: (202) 318-0520
Fax: (202) 318-0520
Web page: http://www.cramton.umd.edu

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  1. Alan S. Blinder & Louis J. Maccini, 1991. "Taking Stock: A Critical Assessment of Recent Research on Inventories," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 73-96, Winter.
  2. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
  3. Gunderson, Morley & Kervin, John & Reid, Frank, 1986. "Logit Estimates of Strike Incidence from Canadian Contract Data," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 257-76, April.
  4. David Card, 1988. "Strikes and Wages: A Test of a Signalling Model," NBER Working Papers 2550, National Bureau of Economic Research, Inc.
  5. Cramton, Peter C, 1992. "Strategic Delay in Bargaining with Two-Sided Uncertainty," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 205-25, January.
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