NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Striking for a Bargain Between Two Completely Informed Agents

Raquel Fernandez, Jacob Glazer

NBER Working Paper No. 3108
Issued in September 1989
NBER Program(s):   LS

This paper models the wage-contract negotiation procedure between a union and a firm as a sequential bargaining process in which the union

also decides, in each period, whether or not to strike for the duration of that period. We show that there exist subgame-perfect equilibria in which the union engages in several periods of strikes prior to reaching a final agreement, although both parties are completely rational and fully informed. This has implications for other inefficient phenomena such as tariff wars, debt negotiations, and wars in general. We characterize the set of equilibria, show that strikes can occur in real time, and discuss extensions of the model such as lockouts and the possibility of multiple recontracting opportunities.

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Document Object Identifier (DOI): 10.3386/w3108

Published: American Economic Review, March 1991. citation courtesy of

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