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Bargaining with Commitment between Workers and Large Firms

  • William B. Hawkins

    (University of Rochester)

I study bargaining between workers and large firms when commitment to long-term contracts is feasible. The marginal surplus associated with a match is split in a pre-determined ratio, analogously to generalized Nash bargaining. Commitment avoids the over-hiring inefficiency identified by Stole and Zwiebel (1999a,b) and Smith (1999). However, even under the Hosios (1990) condition, the equilibrium is still not constrained efficient since large firms search too intensively relative to small firms. If workers can direct their search to firms by size, or if firms can hire workers instantaneously at constant marginal cost, the equilibrium is constrained efficient if the Hosios condition applies. The pattern of growth rates of firms by size can be used to identify how firms bargain with workers.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 308.

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Date of creation: 2011
Date of revision:
Handle: RePEc:red:sed011:308
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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  1. Serene Tan, 2012. "Directed Search And Firm Size," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 95-113, 02.
  2. William Hawkins, 2015. "Bargaining with Commitment Between Workers and Large Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 350-364, April.
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  13. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  14. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
  15. Gabriel Felbermayr & Julien Prat, 2011. "Product Market Regulation, Firm Selection, And Unemployment," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 278-317, 04.
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  19. Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
  20. William B. Hawkins, 2013. "Competitive Search, Efficiency, And Multiworker Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 219-251, 02.
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  28. Hawkins, William B. & Acemoglu, Daron, 2014. "Search with multi-worker firms," Theoretical Economics, Econometric Society, vol. 9(3), September.
  29. Pissarides, Christopher A, 1985. "Taxes, Subsidies, and Equilibrium Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 52(1), pages 121-33, January.
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