Information Incentives and Contract Timing Patterns

Gary Fethke and Andrew J Policano

International Economic Review, 1990, vol. 31, issue 3, 651-65

Abstract: A prominent feature of wage contracting in the United States is the "bunched" timing pattern that is often associated with the process of pattern bargaining. The model describes the bunching of wage contracts as the equilibrium outcome of decentralized decisions in an economy composed of both competitive and monopolistically competitive product markets. Agents time their wage adjustment to take advantage of the information associated with the timing decisions of others; this information-based motive leads to staggered contracting. A bunching equilibrium requires the presence of heterogeneous product markets and occurs because the information transmitted by contracting agents differs across the market structures. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1990
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