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A Theory of Holdouts in Wage Bargaining

Wulong Gu () and Peter Kuhn ()

American Economic Review, 1998, vol. 88, issue 3, 428-49

Abstract: Holdouts (the continuation of negotiations beyond the contract expiry date) are the most common form of disputes in labor contract negotiations. The authors model holdouts as a delaying tactic employed by unions to obtain information about other bargaining outcomes in their industry. Novel implications of their model include a positive association between holdout duration and the number of bargaining pairs negotiating contracts simultaneously; bunching of holdout durations within these 'negotiating groups'; and fewer strikes among holdouts which end later in groups. Using a large panel of contract negotiations in Canadian manufacturing, the authors find considerable support for these predictions. Copyright 1998 by American Economic Association.

Date: 1998
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Handle: RePEc:aea:aecrev:v:88:y:1998:i:3:p:428-49