Wages and Employment in a Repeated Game with Revenue Fluctuations

Christian Schultz (cs@econ.ku.dk)

No 95-01, Discussion Papers from University of Copenhagen. Department of Economics

Abstract: This paper analyses wages and employment in a repeated game between a union and a firm. The parties cannot enter a binding contract, and revenue is fluctuating. It is shown that if discount factors are moderate, then the best sequence of wage rates and employments sustainable in a subgame perfect equilibrium and sharing the surplus in fixed proportions, has a more counter cyclical wage rate than the one sharing the surplus in the same proportions in each period. This result holds true whether the revenue shocks are i.i.d. or follows a Markov process with persistence.

JEL-codes: E24 E32 (search for similar items in EconPapers)
Pages: 22 pages
Date: 1995-01
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Citations:

Published in: European Economic Review, 1997, 41(1) pp 147-62

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Journal Article: Wages and employment in a repeated game with revenue fluctuations (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9501

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