Working Paper: NBER ID: w3108
Authors: Raquel Fernandez; Jacob Glazer
Abstract: This paper models the wage-contract negotiation procedure between a union and a firm as a sequential bargaining process in which the union\nalso 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.
Keywords: wage-contract negotiation; union; sequential bargaining; strikes; subgame-perfect equilibria
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Union's strikes (J52) | Delays in negotiations (F51) |
| Delays in negotiations (F51) | Final wage agreement (J33) |
| Union's strikes (J52) | Final wage agreement (J33) |