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Efficiency and behavioral considerations in labor negotiations

Manfred Königstein and Marie Claire Villeval ()
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Manfred Königstein: IZA - Institute for the study of labor - Institute for the Study of Labor - IZA, Universität Erfurt - Universität Erfurt

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Abstract: Experimental literature has shown that social preferences influence how individuals bargain and make sharing decisions. It usually considers situations in which individuals negotiate on a single issue. This paper explores a different environment and reports on an experiment based on a non-cooperative game in which the choice of the bargaining agenda is endogenous. We fnd that firms reveal a strong preference for single-issue bargaining although the subgame perfect equilibrium predicts the choice of the multi-issue bargaining. In multi-issue bargaining unions offer smaller relative payoff shares to firms than in single-issue bargaining and this leads to a higher conflict rate than in a single-issue bargaining. Social preferences and a concern for relative payoffs support this preference for a restricted bargaining agenda but they induce a loss of efficiency.

Keywords: Experiment; Bargaining agenda; Efficient contracts; Right-to-manage; Social preferences (search for similar items in EconPapers)
Date: 2010
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Published in Journal of Economic Psychology, Elsevier, 2010, 31 (4), pp. 599-611. ⟨10.1016/j.joep.2010.04.003⟩

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