Wage Bargaining with Time-Varying Threats

Peter Cramton and Joseph Tracy

Papers of Peter Cramton from University of Maryland, Department of Economics - Peter Cramton

Abstract: We study wage bargaining in which the union is uncertain about the firm's willingness to pay and threat payoffs vary over time. Strike payoffs change over time as replacement workers are hired, as strikers find temporary jobs, and as inventories or strike funds run out. We find that bargaining outcomes are substantially altered if threat payoffs vary. If dispute costs increase in the long-run, then dispute durations are longer, settlement rates are lower, and wages decline more slowly during the short-run (and may even increase). The settlement wage is largely determined from the long-run threat, rather than the short-run threat.

Keywords: Bargaining; Transaction Costs; Strikes; Unions; Private Information (search for similar items in EconPapers)
JEL-codes: C78 J52 (search for similar items in EconPapers)
Pages: 24 pages
Date: 1994, Revised 1998-06-09
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Published in Journal of Labor Economics, 12:4, October 1994, pages 594-617.

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Persistent link: https://EconPapers.repec.org/RePEc:pcc:pccumd:94jolew

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