Inefficient equilibria in wage bargaining with discount rates varying in time

Ahmet Ozkardas () and Agnieszka Rusinowska
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Ahmet Ozkardas: Turgut Ozal University

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Abstract: We consider a union-firm wage bargaining in which the union must choose between strike and holdout in case of disagreement, and preferences of the union and the firm are expressed by sequences of discount rates varying in time. We show that there may exist inefficient subgame perfect equilibria in the model under which the union engages in several periods of strikes prior to reaching a final agreement. For an inefficient equilibrium to exist, the status quo wage must be sufficiently low and the amounts that the firm offers for itself in the subgame perfect equilibrium under the exogenous always strike decision in every odd period before reaching an agreement must be sufficiently low.

Keywords: discount; rates (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-mic
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Published in Economics Bulletin, 2015, 35 (3), pp.1744-1751

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Journal Article: Inefficient equilibria in wage bargaining with discount rates varying in time (2015)
Working Paper: Inefficient equilibria in wage bargaining with discount rates varying in time (2015)
Working Paper: Inefficient equilibria in wage bargaining with discount rates varying in time (2015)
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