Entry Threats and Inefficiency in ‘Efficient Bargaining’

Rupayan Pal () and Bibhas Saha

Working Papers from eSocialSciences

Abstract: Whether the outcome of bargaining over wage and employment between an incumbent firm and a union remains efficient under entry threat is examined. The workers\' reservation wage is not known to the entrant, and entry is profitable only against the high reservation wage. The entrant observes the pre-entry price, but not necessarily the wage agreements. When wage is not observed, contracts feature over-employment. Under separating equilibrium the low type is over-employed, and under pooling equilibrium the high type is over-employed. But when wage is observed, pooling equilibrium may not always exist, and separating equilibrium does not involve any inefficiency. [Working Paper No. 2010-016].

Keywords: firm; employment; Efficient Bargaining; Entry Threat; Signalling; Inefficiency; wage; employed; equilibrium; inefficiencey; contracts; price; enttrant; reservation (search for similar items in EconPapers)
Date: 2010-09
New Economics Papers: this item is included in nep-bec, nep-cta and nep-lab
Note: Institutional Papers
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.esocialsciences.org/Download/repecDownl ... &AId=2833&fref=repec

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ess:wpaper:id:2833

Access Statistics for this paper

More papers in Working Papers from eSocialSciences
Bibliographic data for series maintained by Padma Prakash ().