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Implementing endogenous inside options in Nash wage bargaining models

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  • Knabe, Andreas

Abstract

The Rubinstein alternating-offers game shows that the threat point in Nash wage bargaining models should be the inside, instead of the outside, option. We provide a new way to implement inside options by explicitly modeling a utilitarian union's strike payoff. The solution to the dynamic bargaining system resulting from the endogeneity of the inside option can serve as a basis for richer, though still easily applicable, models of wage bargaining that are more in accordance with their game-theoretical underpinnings. The dynamics of the model also provide a theoretical justification for temporarily delayed labor market responses to policy changes.

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  • Knabe, Andreas, 2009. "Implementing endogenous inside options in Nash wage bargaining models," Mathematical Social Sciences, Elsevier, vol. 57(2), pages 161-176, March.
    • Handle: RePEc:eee:matsoc:v:57:y:2009:i:2:p:161-176
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    References listed on IDEAS

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    Cited by:

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    2. Raduna, Daniela Viviana & Roman, Mihai Daniel, 2011. "Risk aversion influence on insurance market," MPRA Paper 37725, University Library of Munich, Germany, revised 01 Feb 2012.
    3. Zapal, Jan, 2018. "Patience in repeated bargaining: Revisiting Muthoo (1999)," Journal of Mathematical Economics, Elsevier, vol. 75(C), pages 150-153.

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