IDEAS home Printed from https://ideas.repec.org/p/vua/wpaper/1999-21.html
   My bibliography  Save this paper

Commitment and wage bargaining in job matching models with costly search

Author

Listed:
  • Abbring, Jaap H.

    (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics)

Abstract

This paper provides a new strategic underpinning of the axiomatic Nash bargaining solution that is widely applied in search-matching models of the labor market. This ‘intertemporal surplus sharing’ (ISS) solution is usually defended as the unique subgame perfect equilibrium of a strategic bargaining model in which the risk of breakdown grows infinitely large. We argue that such extreme assumptions on the risk of breakdown during disagreement are unattractive in the context of a search-matching model. We then show that ISS arises for arbitrary breakdown rates if agents can precommit to search during disagreement.

Suggested Citation

  • Abbring, Jaap H., 1999. "Commitment and wage bargaining in job matching models with costly search," Serie Research Memoranda 0021, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    • Handle: RePEc:vua:wpaper:1999-21
    as

    Download full text from publisher

    File URL: http://degree.ubvu.vu.nl/repec/vua/wpaper/pdf/19990021.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
    3. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    5. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-837, September.
    6. Rubinstein, Ariel & Wolinsky, Asher, 1985. "Equilibrium in a Market with Sequential Bargaining," Econometrica, Econometric Society, vol. 53(5), pages 1133-1150, September.
    7. Busch, Lutz-Alexander & Wen, Quan, 1995. "Perfect Equilibria in Negotiation Model," Econometrica, Econometric Society, vol. 63(3), pages 545-565, May.
    8. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 217-227.
    9. Peter A. Diamond & Eric Maskin, 1979. "An Equilibrium Analysis of Search and Breach of Contract, I: Steady States," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 282-316, Spring.
    10. Wolinsky, Asher, 1987. "Matching, search, and bargaining," Journal of Economic Theory, Elsevier, vol. 42(2), pages 311-333, August.
    11. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
    12. Ken Binmore & Avner Shared & John Sutton, 1989. "An Outside Option Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 753-770.
    13. Pissarides, Christopher A, 1984. "Search Intensity, Job Advertising, and Efficiency," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 128-143, January.
    14. W. Bentley MacLeod & James M. Malcomson, 1995. "Contract Bargaining with Symmetric Information," Canadian Journal of Economics, Canadian Economics Association, vol. 28(2), pages 336-367, May.
    15. Christopher A. Pissarides, 1985. "Taxes, Subsidies and Equilibrium Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 121-133.
    16. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-1364, November.
    17. Haller, Hans & Holden, Steinar, 1990. "A letter to the editor on wage bargaining," Journal of Economic Theory, Elsevier, vol. 52(1), pages 232-236, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Belan, Pascal & Carré, Martine & Gregoir, Stéphane, 2010. "Subsidizing low-skilled jobs in a dual labor market," Labour Economics, Elsevier, vol. 17(5), pages 776-788, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Binmore, Ken & Osborne, Martin J. & Rubinstein, Ariel, 1992. "Noncooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 7, pages 179-225, Elsevier.
    2. Roberto Serrano, 2007. "Bargaining," Working Papers 2007-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
    3. Spulber, Daniel F., 2016. "Patent licensing and bargaining with innovative complements and substitutes," Research in Economics, Elsevier, vol. 70(4), pages 693-713.
    4. Vicente Calabuig Alcantara, 1997. "Ineficiencias en las negociaciones entre dos agentes completamente informados," Working Papers. Serie EC 1997-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Christopher A. Pissarides, 2011. "Equilibrium in the Labor Market with Search Frictions," American Economic Review, American Economic Association, vol. 101(4), pages 1092-1105, June.
    6. Furusawa, Taiji & Wen, Quan, 2002. "Disagreement points in trade negotiations," Journal of International Economics, Elsevier, vol. 57(1), pages 133-150, June.
    7. Dilip Abreu & David G. Pearce, 2006. "Reputational Wars of Attrition with Complex Bargaining Postures," Levine's Working Paper Archive 122247000000001218, David K. Levine.
    8. Harold Houba & Quan Wen, 2006. "Perfect Equilibria in a Negotiation Model with Different Time Preferences," Tinbergen Institute Discussion Papers 06-028/1, Tinbergen Institute.
    9. Ayşe Mumcu, 2010. "Strategic Withholding Of Firm‐Specific Skills In Wage Bargaining," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(2), pages 187-211, May.
    10. Sebastian Schweighofer-Kodritsch, 2015. "Time Preferences and Bargaining," STICERD - Theoretical Economics Paper Series /2015/568, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    11. Lucy White & Mark Williams, 2009. "Bargaining with imperfect enforcement," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 317-339, June.
    12. Mumcu, Ayşe, 1999. "Firm-Specific Skills, Wage Bargaining, and Efficiency," MPRA Paper 1913, University Library of Munich, Germany.
    13. Knabe, Andreas, 2009. "Implementing endogenous inside options in Nash wage bargaining models," Mathematical Social Sciences, Elsevier, vol. 57(2), pages 161-176, March.
    14. Fengjiao Chen & Chiu Yu Ko & Duozhe Li, 2018. "On the role of outside options in wage renegotiation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(4), pages 792-803, October.
    15. Gilbert L. Skillman, 2022. "The Nash bargaining solution in labor market analysis," Metroeconomica, Wiley Blackwell, vol. 73(3), pages 884-899, July.
    16. Harold Houba, 2008. "Computing Alternating Offers And Water Prices In Bilateral River Basin Management," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 10(03), pages 257-278.
    17. Houba, Harold & Wen, Quan, 2011. "Extreme equilibria in the negotiation model with different time preferences," Games and Economic Behavior, Elsevier, vol. 73(2), pages 507-516.
    18. Houba, Harold, 1997. "The policy bargaining model," Journal of Mathematical Economics, Elsevier, vol. 28(1), pages 1-27, August.
    19. Manel Baucells & Steven A. Lippman, 2004. "Bargaining with Search as an Outside Option: The Impact of the Buyer's Future Availability," Decision Analysis, INFORMS, vol. 1(4), pages 235-249, December.
    20. repec:eee:labchp:v:3:y:1999:i:pb:p:2567-2627 is not listed on IDEAS
    21. Harold Houba & Quan Wen, 2007. "Extreme Equilibria in a General Negotiation Model," Tinbergen Institute Discussion Papers 07-070/1, Tinbergen Institute.

    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vua:wpaper:1999-21. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: R. Dam (email available below). General contact details of provider: https://edirc.repec.org/data/fewvunl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.