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Does Bargaining Matter in the Small Firm’s Matching Model?

  • Olivier LHARIDON

    (University of Rennes 1 - CREM-CNRS)

  • Franck MALHERBET

    (Ecole Polytechnique)

  • Sébastien PEREZ-DUARTE

    (BCE.)

In this article, we use a stylized model of the labor market to investigate the effects of three alternative and well-known bargaining solutions. We apply the Nash, the Egalitarian and the Kalai-Smorodinsky bargaining solutions in the small firm’s matching model of unemployment. We first show that the Egalitarian and the Kalai-Smorodinsky solutions are easily implementable within search-matching economies. Second, we show that the differences between the three solution are weaker than expected. This contrasts with some of the main results obtained by the recent literature.

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Paper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201116.

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Date of creation: Sep 2011
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Handle: RePEc:tut:cremwp:201116
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  1. Philip Jung & Keith Kuester, 2011. "Optimal labor-market policy in recessions," Working Papers 11-48, Federal Reserve Bank of Philadelphia.
  2. Fredriksson, P. & Holmlund, B., 1998. "Optimal Unemployment Insurance in Search Equilibrium," Papers 1998-2, Uppsala - Working Paper Series.
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  15. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-18, May.
  16. Chun, Youngsub, 1988. "The equal-loss principle for bargaining problems," Economics Letters, Elsevier, vol. 26(2), pages 103-106.
  17. Gerber, Anke & Upmann, Thorsten, 2006. "Bargaining solutions at work: Qualitative differences in policy implications," Mathematical Social Sciences, Elsevier, vol. 52(2), pages 162-175, September.
  18. Etienne LEHMANN & Bruno VAN DER LINDEN, 2002. "On the optimality of search matching equilibrium when workers are risk averse," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  30. Marcus Dittrich, 2010. "Minimum Wages and Unemployment Benefits in a Unionized Economy: A Game-Theoretic Approach," Annals of Economics and Finance, Society for AEF, vol. 11(2), pages 209-229, November.
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