Striking for a Bargain between Two Completely Informed Agents

36 Pages Posted: 13 Nov 2007 Last revised: 1 Jul 2010

See all articles by Raquel Fernández

Raquel Fernández

New York University - Leonard N. Stern School of Business, Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Jacob Glazer

Boston University - Department of Economics

Date Written: September 1989

Abstract

This paper models the wage-contract negotiation procedure between a union and a firm as a sequential bargaining process in which the unionalso decides, in each period, whether or not to strike for the duration of that period. We show that there exist subgame-perfect equilibria in which the union engages in several periods of strikes prior to reaching a final agreement, although both parties are completely rational and fully informed. This has implications for other inefficient phenomena such as tariff wars, debt negotiations, and wars in general. We characterize the set of equilibria, show that strikes can occur in real time, and discuss extensions of the model such as lockouts and the possibility of multiple recontracting opportunities.

Suggested Citation

Fernández, Raquel and Glazer, Jacob, Striking for a Bargain between Two Completely Informed Agents (September 1989). NBER Working Paper No. w3108, Available at SSRN: https://ssrn.com/abstract=463515

Raquel Fernández (Contact Author)

New York University - Leonard N. Stern School of Business, Department of Economics ( email )

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Jacob Glazer

Boston University - Department of Economics ( email )

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