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Inefficient equilibria in wage bargaining with discount rates varying in time

Author

Listed:
  • Ahmet Ozkardas

    (Turgut Ozal University)

  • Agnieszka Rusinowska

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We consider a union-firm wage bargaining in which the union must choose between strike and holdout in case of disagreement, and preferences of the union and the firm are expressed by sequences of discount rates varying in time. We show that there may exist inefficient subgame perfect equilibria in the model under which the union engages in several periods of strikes prior to reaching a final agreement. For an inefficient equilibrium to exist, the status quo wage must be sufficiently low and the amounts that the firm offers for itself in the subgame perfect equilibrium under the exogenous always strike decision in every odd period before reaching an agreement must be sufficiently low.

Suggested Citation

  • Ahmet Ozkardas & Agnieszka Rusinowska, 2015. "Inefficient equilibria in wage bargaining with discount rates varying in time," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01241273, HAL.
    • Handle: RePEc:hal:cesptp:hal-01241273
    Note: View the original document on HAL open archive server: https://hal.science/hal-01241273
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Bolt, Wilko, 1995. "Striking for a Bargain between Two Completely Informed Agents: Comment," American Economic Review, American Economic Association, vol. 85(5), pages 1344-1347, December.
    3. Agnieszka Rusinowska & Ahmet Ozkardas, 2015. "On equilibrium payoffs in wage bargaining with discount rates varying in time," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(2), pages 181-199, October.
    4. Holden Steinar, 1994. "Bargaining and Commitment in a Permanent Relationship," Games and Economic Behavior, Elsevier, vol. 7(2), pages 169-176, September.
    5. Ahmet Ozkardas & Agnieszka Rusinowska, 2014. "Inefficient equilibria and lockouts in wage bargaining with discount rates varying in time," Documents de travail du Centre d'Economie de la Sorbonne 14073, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    6. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
    7. Haller, Hans & Holden, Steinar, 1990. "A letter to the editor on wage bargaining," Journal of Economic Theory, Elsevier, vol. 52(1), pages 232-236, October.
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    More about this item

    Keywords

    discount rates;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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