The Kalai-Smorodinsky Solution in Labor-Market Negotiations

30 Pages Posted: 11 Jun 2003

See all articles by Thorsten Upmann

Thorsten Upmann

Helmholtz Institute for Functional Marine Biodiversity at the University of Oldenburg; Bielefeld University - Department of Business Administration and Economics; CESifo (Center for Economic Studies and Ifo Institute)

Anke Gerber

Universität Hamburg

Date Written: May 2003

Abstract

Authors who consider efficient bargaining on the labor market predominantly focus on the Nash-bargaining solution. It seems, however, that actual labor market negotiations between an employers' federation and a labor union are often characterized by mutual concessions, which may be accounted for by an application of the Kalai-Smorodinsky solution to labor-market negotiations. Correspondingly, we investigate how a government can influence the equilibrium on the labor market by changing the reservation wage when the equilibrium is determined by the Kalai-Smorodinsky solution. We find that the induced employment effects may differ substantially when compared with the Nash bargaining solution. Hence, substituting the Kalai-Smorodinsky by the Nash bargaining solution is not innocuous, when actual negotiations are characterized by mutual incremental concessions.

Keywords: Labor Market Negotiations, Kalai-Smorodinsky Solution, Nash-bargaining Solution, Reservation Wage, Fiscal and Social Policies

JEL Classification: C78, H39, H55, J40, J51

Suggested Citation

Upmann, Thorsten and Gerber, Anke, The Kalai-Smorodinsky Solution in Labor-Market Negotiations (May 2003). Available at SSRN: https://ssrn.com/abstract=413844

Thorsten Upmann (Contact Author)

Helmholtz Institute for Functional Marine Biodiversity at the University of Oldenburg ( email )

Ammerländer Heerstraße 231
Oldenburg, 26129
Germany

Bielefeld University - Department of Business Administration and Economics ( email )

P.O. Box 100131
D-33501 Bielefeld, NRW 33501
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Anke Gerber

Universität Hamburg ( email )

Faculty of Business, Economics and Social Sciences
Von-Melle-Park 5
Hamburg, 20146
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
181
Abstract Views
2,378
rank
197,143
PlumX Metrics