Strikes as the 'Tip of the Iceberg' in a Theory of Firm-Union Cooperation

Robert Gary-Bobo () and Touria Jaaidane

No 6644, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We model cooperation between an employer and a workers' union as an equilibrium in an infinitely repeated game with discounting and imperfect monitoring. The employer has private information about firm profitability. The model explains the incidence and duration of strikes, as well as the employer's outsourcing (or partial lock-out) decisions. By means of an effort variable, it also extends the theory to account for worker resistance phenomena, taking the form of low effort on the part of employees. Strikes appear as random equilibrium phenomena, during finite-duration, but recurrent phases of play, triggered by the occurrence of a low-profitability state. We show that high-effort and high-pay cooperative agreements between the union and the employer can be supported as perfect public equilibria of the repeated game, if players are patient enough, but only at the cost of random reversions to noncooperative equilibrium in which strikes, low effort, low pay, and outsourcing take place.

Keywords: Imperfect monitoring; Industrial relations; Mechanism design; Public employment; Repeated games; Theory of strikes (search for similar items in EconPapers)
JEL-codes: C73 D2 J45 J5 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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