Wages, Length of Relationship and Bargaining Power: An experimental study in a world of complete contracts

Dennis Dittrich

Papers on Strategic Interaction from Max Planck Institute of Economics, Strategic Interaction Group

Abstract: To explain potential sources of wage rigidity this article analyzes a model of reciprocal kindness applied to a repeated ultimatum game with changing and nonzero conflict payoffs. The model is also tested in a laboratory experiment. The results are compatible with the rentsharing approach to wage rigidity. Wages adjust to 'market pressure' but are less flexible when employees demand their wages, i. e. when they are in a relatively strong bargaining position.

Keywords: rigid wages; reciprocity; labor market; efficiency wages (search for similar items in EconPapers)
JEL-codes: C72 C78 C91 E24 J31 J41 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2004-03
New Economics Papers: this item is included in nep-lab
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