Striking for a Bargain Between Two Completely Informed Agents

Raquel Fernandez and Jacob Glazer ()

No 3108, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper models the wage-contract negotiation procedure between a union and a firm as a sequential bargaining process in which the union also decides, in each period, whether or not to strike for the duration of that period. We show that there exist subgame-perfect equilibria in which the union engages in several periods of strikes prior to reaching a final agreement, although both parties are completely rational and fully informed. This has implications for other inefficient phenomena such as tariff wars, debt negotiations, and wars in general. We characterize the set of equilibria, show that strikes can occur in real time, and discuss extensions of the model such as lockouts and the possibility of multiple recontracting opportunities.

Date: 1989-09
Note: LS
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Citations: View citations in EconPapers (3)

Published as American Economic Review, March 1991.

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Journal Article: Striking for a Bargain between Two Completely Informed Agents (1991)
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