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Pareto-Nash Reversion Strategies: Three Period Dynamic Co-operative Signalling with Sticky Efficiency Wages

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  • Mayaki, Alfred Anate Bodurin

Abstract

This paper uses Nash equilibrium reversion as an optimal tool for clearing dynamic prices and wages. Various exogenous competitive rigidities determine the balanced growth path of the efficiency wage and the outcome of repeated household/firm wage bargaining decisions. A location model is used to explore the extent to which a downstream spatial cooperation agreement might affect the price equilibrium. There is also an endogenous hiring function and a knowledge base that is increasing in output as is the real wage. As the article demonstrates after accounting for real rigidities in the baseline model the effect of wage growth on household utility through staggered bargaining can be best captured by adopting a policy of point scoring on the mobility of skilled labor against the model's key rigidities. Mobility point scores which serve to encourage mobility from skilled labor within the model not only increase the knowledge base but also place upward pressure on nominal wage growth.

Suggested Citation

  • Mayaki, Alfred Anate Bodurin, 2025. "Pareto-Nash Reversion Strategies: Three Period Dynamic Co-operative Signalling with Sticky Efficiency Wages," EconStor Preprints 298827, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:298827
    DOI: 10.13140/RG.2.2.27847.27045
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    Keywords

    labor; wages; mobility; signalling; game theory; competition;
    All these keywords.

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D19 - Microeconomics - - Household Behavior - - - Other

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