Efficient Wage Bargaining as a Repeated Game

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Efficient Wage Bargaining as a Repeated Game

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Paz Espinosa, Maria
Rhee, Changyong

Abstract

This paper builds a bridge between the two existing approaches for wage employment determination in a unionized market: the monopoly union model and the efficient bargaining model. Both fail to capture the dynamic aspects of wage bargaining. When the repeated nature of the wage bargaining process is considered, the equilibria are neither as inefficient as the monopoly union model predicts nor as fully efficient. Rather, the two models can be regarded as particular cases with certain discount rates. The authors apply their model to issues such as the endgame interpretation of the U.S. steel industry, wage concessions, and featherbedding. Copyright 1989, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 104 (1989)
Issue (Month): 3 (August)
Pages: 565-88
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Handle: RePEc:tpr:qjecon:v:104:y:1989:i:3:p:565-88

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