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Wage Bargaining with Time-Varying Threats

Author

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  • Cramton, Peter C
  • Tracy, Joseph S
Abstract
The authors study wage bargaining in which the union is uncertain about the firm's willingness to pay and threat payoffs vary over time. Strike payoffs change as replacement workers are hired, as strikers find temporary jobs, and as inventories or strike funds run out. The authors find that bargaining outcomes are substantially altered if threat payoffs vary. If dispute costs increase in the long run, then dispute durations are longer, settlement rates are lower, and wages decline more slowly during the short run (and may even increase). The settlement wage is largely determined from the long-run threat, rather than the short-run threat. Copyright 1994 by University of Chicago Press.

Suggested Citation

  • Cramton, Peter C & Tracy, Joseph S, 1994. "Wage Bargaining with Time-Varying Threats," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 594-617, October.
    • Handle: RePEc:ucp:jlabec:v:12:y:1994:i:4:p:594-617
    DOI: 10.1086/298363
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    References listed on IDEAS

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    3. repec:ilo:ilowps:265729 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Goerke, Laszlo & Schnabel, Claus, 2002. "On strike insurance," Discussion Papers 12, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    2. Filippo Belloc, 2019. "Labor Conflict at the Workplace: Do Dismissal Regulations Matter?," Department of Economics University of Siena 806, Department of Economics, University of Siena.
    3. Srihari Govindan & Robert Wilson, 2009. "On Forward Induction," Econometrica, Econometric Society, vol. 77(1), pages 1-28, January.
    4. Ahmet Ozkardas & Agnieszka Rusinowska, 2013. "An application of wage bargaining to price negotiation with discount factors varying in time," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00881151, HAL.
    5. Kennan, John, 1995. "Repeated contract negotiations with private information," Japan and the World Economy, Elsevier, vol. 7(4), pages 447-472, November.
    6. Sergi Jiménez-Martín & Jaume Garcia, 2010. "Initial offers and outcomes in wage bargaining: who wins?," Empirical Economics, Springer, vol. 39(3), pages 815-846, December.
    7. Ahmet Ozkardas & Agnieszka Rusinowska, 2012. "Wage bargaining with discount rates varying in time under exogenous strike decisions," Post-Print halshs-00674033, HAL.
    8. Jean-Pierre P. Langlois & Catherine C. Langlois, 2004. "Holding Out for Concession: The Quest for Gain in the Negotiation of International Agreements," International Interactions, Taylor & Francis Journals, vol. 32(3), pages 261-293, April.
    9. Cramton, Peter & Kwerel, Evan & Williams, John, 1998. "Efficient Relocation of Spectrum Incumbents," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 647-675, October.
    10. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect Of Collective Bargaining Legislation On Strikes And Wages," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 475-487, August.
    11. Houba, Harold & Bolt, Wilko, 2000. "Holdouts, backdating and wage negotiations," European Economic Review, Elsevier, vol. 44(9), pages 1783-1800, October.
    12. Govindan, Srihari & Wilson, Robert B., 2008. "Decision-Theoretic Forward Induction," Research Papers 1986, Stanford University, Graduate School of Business.
    13. Antonio Cabrales & Antonio M. Espín & Praveen Kujal & Stephen Rassenti, 2017. "Humans’ (incorrect) distrust of reflective decisions," Working Papers 17-05, Chapman University, Economic Science Institute.
    14. Ahmet Ozkardas & Agnieszka Rusinowska, 2014. "Wage bargaining with discount rates varying in time under different strike decisions," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00975533, HAL.
    15. Adriana Cassoni, 1997. "A brief survey on the role of trade unions in labour market," Documentos de Trabajo (working papers) 0697, Department of Economics - dECON.
    16. Diaz-Moreno, Carlos & Galdon-Sanchez, Jose E., 2000. "Collective bargaining under complete information," LSE Research Online Documents on Economics 19337, London School of Economics and Political Science, LSE Library.
    17. Shogren, Jason F., 1998. "Coasean bargaining with symmetric delay costs," Resource and Energy Economics, Elsevier, vol. 20(4), pages 309-326, December.
    18. Coles, Melvyn & Smith, Eric, 1998. "Strategic bargaining with firm inventories," Journal of Economic Dynamics and Control, Elsevier, vol. 23(1), pages 35-54, September.

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    More about this item

    JEL classification:

    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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