TY  - JOUR
AU  - Perry,Motty
AU  - Solon,Gary
TI  - Wage Bargaining, Labor Turnover, and the Business Cycle:  A Model with Asymmetric Information
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1359
PY  - 1984
Y2  - May 1984
UR  - http://www.nber.org/papers/w1359
L1  - http://www.nber.org/papers/w1359.pdf
N1  - Author contact info:
Motty Perry
Hebrew University of Jerusalem
E-Mail: motty@math.huji.ac.il

Gary Solon
Department of Economics
Michigan State University
East Lansing, MI 48824-1038
Tel: 517/353-9933
Fax: 517/432-1068
E-Mail: solon@msu.edu
AB  - This paper presents a wage bargaining model in which the employer and employee are each uncertain about the other's reservation wage. Under specified circumstances, the model's equilibrium is shown to involve unilateral wage setting and inefficient labor turnover. In addition, aggregate demand shocks affect the equilibrium in a way that produces procyclical quits and countercyclical layoffs.These results are obtained without resorting to assumptions of nominal wage rigidity, long-term contracting, or aggregate price misperceptions.
ER  -