Hostname: page-component-78c5997874-mlc7c Total loading time: 0 Render date: 2024-11-10T21:00:22.807Z Has data issue: false hasContentIssue false
  • English
  • Français

Wage bargaining with discount rates varying in time underdifferent strike decisions∗

Published online by Cambridge University Press:  21 March 2014

Ahmet ozkardas  and
Agnieszka rusinowska
Ahmet ozkardas
Affiliation:
Turgut Ozal University, Faculty of Economics and Administrative Sciences, Department of Economics, Ayvali Mh. 158. Cd. Etlik Kecioren/Ankara, Turkey.. aozkardas@turgutozal.edu.tr Université Paris I Panthéon-Sorbonne, Paris, France.
Agnieszka rusinowska
Affiliation:
Paris School of Economics – CNRS, Université Paris I Panthéon-Sorbonne, Centre d’Economie de la Sorbonne, 106-112 Bd de l’Hôpital, 75647 Paris, France; agnieszka.rusinowska@univ-paris1.fr
Get access

Abstract

We present a non-cooperative union-firm wage bargaining model in which the union mustchoose between strike and holdout if a proposed wage contract is rejected. The innovativeelement that our model brings to the existing literature on wage bargaining concerns theparties’ preferences which are not expressed by constant discount rates, but by sequencesof discount factors varying in time. First, we determine subgame perfect equilibria if thestrike decision of the union is exogenous. We analyze the case when the union is committedto strike in each disagreement period, the case when the union is committed to strike onlywhen its own offer is rejected, and the case of the never strike exogenous decision. Acomparison of the results is provided, among the cases of the exogenous strike decisions.Next, we consider the general model with no assumption on the commitment to strike. Wefind subgame perfect equilibria in which the strategies supporting the equilibria in theexogenous cases are combined with the minimum-wage strategies, provided that the firm isnot less patient than the union. If the firm is more impatient than the union, then thefirm is better off by playing the no-concession strategy. We find a subgame perfectequilibrium for this case.

Keywords

Union – firm bargainingalternating offersvarying discount ratessubgame perfect equilibrium
Type
Research Article
Information
RAIRO - Operations Research , Volume 48 , Issue 3 , July 2014 , pp. 325 - 348
Copyright
© EDP Sciences, ROADEF, SMAI, 2014

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

K. Binmore, Perfect equilibria in bargaining models, in The economy of bargaining, edited by K. Binmore and P. Dasgupta. Oxford, Blackwell (1987) 77–105.
K. Binmore, M. Osborne and A. Rubinstein, Noncooperative models of bargaining, in Handbook of game theory with economic applications, edited by R. Aumann and S. Hart. Chapter 7. Elsevier Science Publishers (1992) 179–225.
Bolt, W., Striking for a bargain between two completely informed agents: Comment. Amer. Econ. Rev. 85 (1995) 1344–1347. Google Scholar
Coles, M.G. and Muthoo, A., Bargaining in a non-stationary environment. J. Econ. Theor. 109 (2003) 70–89. Google Scholar
Cramton, P.C. and Tracy, J.S., Wage bargaining with time-varying threats. J. Labor Econ. 12 (1994) 594–617. Google Scholar
Fernandez, R. and Glazer, J., Striking for a bargain between two completely informed agents. Amer. Econ. Rev. 81 (1991) 240–252. Google Scholar
Fishburn, P.C. and Rubinstein, A., Time preferences. Int. Econ. Rev. 23 (1982) 667–694. Google Scholar
Haller, H. and Holden, S., A letter to the editor on wage bargaining. J. Econ. Theor. 52 (1990) 232–236. Google Scholar
Holden, S., Bargaining and commitment in a permanent relationship. Games Econ. Behavior 7 (1994) 169–176. Google Scholar
Houba, H. and Wen, Q., On striking for a bargain between two completely informed agents. Econ. Theory 37 (2008) 509–519. Google Scholar
A. Muthoo, Bargaining theory with applications. Cambridge University Press (1999).
M.J. Osborne and A. Rubinstein, Bargaining and markets. San Diego, Academic Press (1990).
A. Ozkardas and A. Rusinowska, Wage bargaining with discount rates varying in time under exogenous strike decisions. CES Working Papers (2012) 2012.13.
Rubinstein, A., Perfect equilibrium in a bargaining model. Econometrica 50 (1982) 97–109. Google Scholar
A. Rusinowska, Bargaining problem with non-stationary preferences of the players. Ph.D. dissertation, written in Polish (2000).
A. Rusinowska, On certain generalization of Rubinstein’s bargaining model, in Game theory and applications, vol. VIII, edited by L.A. Petrosjan and V.V. Mazalov.Inc. New York, Nova Science Publishers (2001) 159–169.
Rusinowska, A., Subgame perfect equilibria in model with bargaining costs varying in time. Math. Meth. Oper. Res. 56 (2002) 303–313. Google Scholar
Rusinowska, A., Bargaining model with sequences of discount rates and bargaining costs. Int. Game Theor. Rev. 6 (2004) 265–280. Google Scholar
Shaked, A. and Sutton, J., Unemployment as a perfect equilibrium in a bargaining model. Econometrica 52 (1984) 1351–1364. Google Scholar