IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/1913.html
   My bibliography  Save this paper

Firm-Specific Skills, Wage Bargaining, and Efficiency

Author

Listed:
  • Mumcu, Ayşe

Abstract

We study the bargaining relationship between a firm and its incumbent worker who possesses firm-specific human capital. We show that, in the contract renewal stage, the worker's ability to use his firm-specific skills strategically increases his bargaining power vis-a-vis the firm. The firm can threaten to fire the worker and hire a new inexperienced worker, but this threat is not always credible. Even though the bargaining takes place in an environment with perfect information, the game has inefficient equilibria where delays occur in real time.

Suggested Citation

  • Mumcu, Ayşe, 1999. "Firm-Specific Skills, Wage Bargaining, and Efficiency," MPRA Paper 1913, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:1913
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/1913/1/MPRA_paper_1913.pdf
    File Function: original version
    Download Restriction: no
    File URL: https://mpra.ub.uni-muenchen.de/2474/1/MPRA_paper_2474.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    3. William P. Rogerson, 1992. "Contractual Solutions to the Hold-Up Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(4), pages 777-793.
    4. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    5. Tai-Yeong Chung, 1991. "Incomplete Contracts, Specific Investments, and Risk Sharing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(5), pages 1031-1042.
    6. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
    7. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
    8. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-837, September.
    9. Busch, Lutz-Alexander & Wen, Quan, 1995. "Perfect Equilibria in Negotiation Model," Econometrica, Econometric Society, vol. 63(3), pages 545-565, May.
    10. Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(3), pages 375-410.
    11. Asher Wolinsky, 2000. "A Theory of the Firm with Non-Binding Employment Contracts," Econometrica, Econometric Society, vol. 68(4), pages 875-910, July.
    12. 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.
    13. Erin Anderson & David C. Schmittlein, 1984. "Integration of the Sales Force: An Empirical Examination," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 385-395, Autumn.
    14. Anat R. Admati & Motty Perry, 1987. "Strategic Delay in Bargaining," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(3), pages 345-364.
    15. Oliver E. Williamson & Michael L. Wachter & Jeffrey E. Harris, 1975. "Understanding the Employment Relation: The Analysis of Idiosyncratic Exchange," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 250-278, Spring.
    16. Klein, Benjamin, 1988. "Vertical Integration as Organizational Ownership: The Fisher Body-General Motors Relationship Revisited," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 199-213, Spring.
    17. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-1364, November.
    18. 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.
    19. George J. Mailath & Andrew Postlewaite, 1990. "Workers Versus Firms: Bargaining Over a Firm's Value," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 369-380.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ayşe Mumcu, 2010. "Strategic Withholding Of Firm‐Specific Skills In Wage Bargaining," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(2), pages 187-211, May.
    2. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    3. Wait, A., 2001. "Delays in Bargaining With Incompelete Contracts," Department of Economics - Working Papers Series 809, The University of Melbourne.
    4. Vicente Calabuig Alcantara, 1997. "Ineficiencias en las negociaciones entre dos agentes completamente informados," Working Papers. Serie EC 1997-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    5. Shingo Ishiguro, 2010. "Holdup, search, and inefficiency," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(2), pages 307-338, August.
    6. Vicente Calabuig, 1999. "Ineficiencias de las negociaciones entre dos agentes completamente informados: un panorama," Investigaciones Economicas, Fundación SEPI, vol. 23(3), pages 303-329, September.
    7. Lucy White & Mark Williams, 2009. "Bargaining with imperfect enforcement," RAND Journal of Economics, RAND Corporation, vol. 40(2), pages 317-339, June.
    8. Abbring, Jaap H., 1999. "Commitment and wage bargaining in job matching models with costly search," Serie Research Memoranda 0021, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    9. Taiji Furusawa & Quan Wen, 2001. "Unique Inneficient Perfect Equilibrium in a Stochastic Model of Bargaining with Complete Information," Vanderbilt University Department of Economics Working Papers 0121, Vanderbilt University Department of Economics.
    10. Jesse A. Schwartz & Quan Wen, 2006. "Wage Bargaining Under the National Labor Relations Act," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 1017-1039, December.
    11. Houba, Harold & Wen, Quan, 2014. "Backward induction and unacceptable offers," Journal of Mathematical Economics, Elsevier, vol. 54(C), pages 151-156.
    12. Busch, Lutz-Alexander & Horstmann, Ignatius J., 2002. "The game of negotiations: ordering issues and implementing agreements," Games and Economic Behavior, Elsevier, vol. 41(2), pages 169-191, November.
    13. Robert Gibbons & John Roberts, 2012. "The Handbook of Organizational Economics," Economics Books, Princeton University Press, edition 1, volume 1, number 9889.
    14. Furusawa, Taiji & Wen, Quan, 2002. "Disagreement points in trade negotiations," Journal of International Economics, Elsevier, vol. 57(1), pages 133-150, June.
    15. André Kurmann, 2009. "Holdups and Overinvestment in Physical Capital Markets," Cahiers de recherche 0904, CIRPEE.
    16. Cai, Hongbin, 2000. "Delay in Multilateral Bargaining under Complete Information," Journal of Economic Theory, Elsevier, vol. 93(2), pages 260-276, August.
    17. Gao, Hong & Xu, Haibo, 2021. "Multilateral bargaining with an endogenously determined procedure," Economics Letters, Elsevier, vol. 209(C).
    18. Xiao, Jun, 2018. "Bargaining orders in a multi-person bargaining game," Games and Economic Behavior, Elsevier, vol. 107(C), pages 364-379.
    19. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
    20. Harold Houba & Quan Wen, 2006. "Perfect Equilibria in a Negotiation Model with Different Time Preferences," Tinbergen Institute Discussion Papers 06-028/1, Tinbergen Institute.
    21. Harold Houba & Quan Wen, 2008. "On striking for a bargain between two completely informed agents," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 37(3), pages 509-519, December.

    More about this item

    Keywords

    bargaining; firm-specific skills;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:1913. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.