Bargaining and hold-up: the role of arbitration
Yannick Gabuthy () and
Abhinay Muthoo
Additional contact information
Yannick Gabuthy: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique
Post-Print from HAL
Abstract:
This paper analyses arbitration as a surrogate for complete contracts. We embed this idea in a simple model of a long-term relationship between a firm and its workforce, in which they can make productive-enhancing, relationship-specific investments, and then negotiate over the division of the resultant surplus. It is shown that the mere presence of the arbitrator (in the background of negotiations) may enhance investment incentives ex ante by minimizing each party's ability to engage in hold-up behaviours ex post. Furthermore, we highlight notably that the partners should optimally commit to call an arbitrator ensuring a compromise by awarding a reasonable share of the surplus to the worker. Indeed, this type of arbitrator would harmonize the parties' bargaining powers and then weight their investment incentives optimally.
Keywords: Contracts; Firms; Relationship (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (2)
Published in Oxford Economic Papers, 2019, 71 (1), pp.292-308. ⟨10.1093/oep/gpy035⟩
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Related works:
Journal Article: Bargaining and hold-up: the role of arbitration (2019) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02180084
DOI: 10.1093/oep/gpy035
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().