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Bargaining over a Menu of Wage Contracts

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  • Gyu Ho Wang

Abstract

We investigate an infinite horizon bargaining problem in which a firm and a worker bargain over two dimensions, quality and wage. The worker has private information about his type. Only the uninformed firm makes an offer and it can offer a menu of quality-wage contracts instead of single one. We show that for all discount factors, the unique sequential equilibrium outcome is separating without delay; the firm separates the types of worker with a menu of contracts in the first period. Our result shows that in multi-dimensional bargaining, the "Coase Conjecture" holds in the sense that the game ends in the first period. But it fails in the sense that the uninformed party can preserve the entire bargaining power.

Suggested Citation

  • Gyu Ho Wang, 1998. "Bargaining over a Menu of Wage Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 295-305.
    • Handle: RePEc:oup:restud:v:65:y:1998:i:2:p:295-305.
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    File URL: http://hdl.handle.net/10.1111/1467-937X.00045
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    Cited by:

    1. John Asker & Estelle Cantillon, 2010. "Procurement when price and quality matter," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 1-34, March.
    2. Beccuti, Juan & Möller, Marc, 2021. "Screening by mode of trade," Games and Economic Behavior, Elsevier, vol. 129(C), pages 400-420.
    3. Inderst, Roman, 2008. "Durable goods with quality differentiation," Economics Letters, Elsevier, vol. 100(2), pages 173-177, August.
    4. Mikhail Drugov, 2010. "Information and delay in an agency model," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 598-615, September.
    5. S. Nageeb Ali & Navin Kartik & Andreas Kleiner, 2023. "Sequential Veto Bargaining With Incomplete Information," Econometrica, Econometric Society, vol. 91(4), pages 1527-1562, July.
    6. Kumar, Praveen, 2006. "Intertemporal price-quality discrimination and the Coase conjecture," Journal of Mathematical Economics, Elsevier, vol. 42(7-8), pages 896-940, November.
    7. Ueng, Zen-Fu & Yang, C.C., 2005. "Extracting consumer information rent by delaying the delivery of goods/services," Economics Letters, Elsevier, vol. 87(1), pages 103-108, April.
    8. Kumar, Praveen, 2002. "Price and quality discrimination in durable goods monopoly with resale trading," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1313-1339, November.
    9. Thanassoulis, John, 2004. "Haggling over substitutes," Journal of Economic Theory, Elsevier, vol. 117(2), pages 217-245, August.
    10. John Thanassoulis, 2001. "Multiproduct Haggling," Economics Series Working Papers 2000-W21, University of Oxford, Department of Economics.
    11. Brzustowski, Thomas & Georgiadis Harris, Alkis & Szentes, Balázs, 2023. "Smart contracts and the Coase conjecture," LSE Research Online Documents on Economics 117950, London School of Economics and Political Science, LSE Library.
    12. Galizzi, Matteo M. & Miraldo, Marisa, 2011. "The effects of hospitals' governance on optimal contracts: Bargaining vs. contracting," Journal of Health Economics, Elsevier, vol. 30(2), pages 408-424, March.
    13. Cantillon, Estelle & Asker, John, 2005. "Optimal Procurement When Both Price and Quality Matter," CEPR Discussion Papers 5276, C.E.P.R. Discussion Papers.

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