credentials and wage discrimination the subject is wage discrimination among workers with differing privately known reservation wages and costs of obtaining credentials that can be observed by a monopsonist firm numerical examples are studied in which workers are equally productive and in the population their reservation wages and credentialing costs have a normal distribution with negative correlation according to these examples wage discrimination is unprofitable

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

nonrenewable resources with switching costs abstract this paper considers a firm s decision to commence or to suspend extraction of a nonrenewable resource when there are start up or shut down costs for a given level of reserves the critical price that would cause an inactive mine to be opened exceeds the price that would induce an active mine to be closed as one would expect greater switching costs cause firms to be less inclined to change status this impact can be substantial even for modest switching costs possible implications of switching costs are considered including the potential for firms to abandon mines with economically valuable remaining reserves

output dynamics in real business cycles models the time series literature reports two stylized facts about output dynamics in the united states gnp growth is positively autocorrelated and gnp appears to have an important trend reverting component this paper investigates whether current real business cycle rbc models are consistent with these stylized facts many rbc models have weak internal propagation mechanisms and must rely on external sources of dynamics to replicate both facts models that incorporate labor adjustment costs are partially successful they endogenously generate positive autocorrelation in output growth but they need implausibly large transitory shocks to match the trend reverting component in output

strikes and holdouts in wage bargaining theory and data we develop a private information model of union contract negotiations in which disputes signal a firm s willingness to pay previous models have assumed that all labor disputes take the form of a strike yet a prominent feature of u s collective bargaining is the holdout negotiations often continue without a strike after the contract has expired production continues with workers paid according to the expired contract we analyze the union s decision to strike or hold out and highlight its importance to strike activity strikes are more likely to occur after a drop in the real wage or a decline in unemployment

a direct mechanism characterization of sequential bargaining with one sided incomplete information we characterize the sequential equilibria of a class of infinite horizon bargaining games with one sided incomplete information when the seller the uninformed party makes all the offers we prove a folk theorem every incentive compatible individually rational direct bargaining mechanism is implementable by sequential equilibria introducing buyer counteroffers eliminates outcomes which are unfavorable to that party as the proportion of buyer offers increases the set of implementable mechanisms shrinks continuously when the proportion reaches one only the single outcome most favorable to the buyer remains thus depending on the offer structure sequentiality may or may not impose restrictions beyond static incentive compatibility

the private and social value of information exploration for exhaustible resources abstract in this paper i develop a model where exploration yields information about the size and location of the stock of an exhaustible resource this information is valuable in two ways first before production takes place reserves must be located through exploration the process of exploration changes unproven reserves which cannot be produced into proven reserves which can one value of exploration then is that it allows total production over time to expand the expansion effect second by exploring in an early time period a producer gains information about the true stock size prior to making a decision about how fast to exploit reserves with better information the extraction rate chosen by the producer will yield higher expected returns from the stock the timing effect i show that the expansion effect is undervalued by a firm relative to a social planner an increase in proven reserves increases production and lowers prices improving consumer welfare the timing effect however can be over or undervalued by a firm relative to a social planner if the exploring firm makes up a relatively small portion of industry and if consumers are not highly risk averse then the firm will overvalue the timing effect as a result firms may not explore some tracts where it is efficient to do so if however a firm finds it valuable to explore a tract it may explore earlier in time than is optimal

unions and strikes with asymmetric information strikes seem to be a pareto inefficient outcome of bargaining between a union and a firm however this paper shows that strikes can be the outcome of rational behavior by both agents if the firm has more information than the union concerning the state of nature the union can use strikes as a way of gaining information the paper uses an asymmetric information model where the firm has information about the state i e profitability that the union does not know the schedule of wage offers by the union then depends on the probability that a given state will occur

strike incidence and the business cycle in ireland strike incidence equations are estimated for manufacturing strikes in ireland from 1960 to 1989 using both poisson and negative binomial regression models a number of alternative business cycle measures are specified the pro cyclicity of strikes is confirmed in all cases and is invariant to the measurement of the cyclical component the numerical size of the cyclical effect on strike activity is however quite small

cyclical fluctuations in strike activity using a set of data on contracts and strikes for the period 1970 81 the author distinguishes among the roles of aggregate business conditions labor market conditions and product market conditions in the determination of strike incidence and duration strike incidence is found to be highest in industries that are depressed relative to the rest of the economy but in regions with low unemployment this finding is consistent with the theory that the cost of a strike to a firm increases with the demand for its product and the cost of a strike to the union increases with unemployment another finding however is that strikes are longest in industries that are booming relative to the rest of the economy

strikes in colonial india 1921 1938 newly collected data on india s textile industry over the years 1921 38 show strike rates far higher than those observed in the british or u s textile industries when they were at a similar stage

strategic delay in bargaining this paper analyses a bargaining model with incomplete information in which the time between offers is an endogenous strategic variable we find equilibria involving a delay to agreement that is due to the use of strategic time delay by bargainers to signal their relative strength under some specifications of the parameters delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction this delay does not vanish as the minimal time between offers becomes small

empirical test of a separating equilibrium in national football league contract negotiations i empirically test for a separating equilibrium in the bargaining contract of national football league nfl contract negotiations the separating equilibrium predicts that a player who delays contractual agreement signs a more lucrative contract and has positive private information on his ability level at the time of contract negotiations these predictions are tested using data on 1 873 players selected in the 1986 through 1991 nfl drafts the empirical results support the implications of the separating equilibrium

bargaining and strikes strikes are generally regarded as an important economic phenomenon and yet good theoretical explanations of them are hard to come by the difficulty is to understand why rational parties should resort to a wasteful mechanism as a way of distributing the gains from trade why could not both parties be made better off by moving to the final distribution of surplus immediately or if it is uncertain to its certainty equivalent and sharing the benefits from increased production

money new keynesian macroeconomics and the business cycle abstract we show in this paper that the typical modern business cycle cannot be reduced to the real business cycles archetype a monopolistic competition model with price adjustment costs affected by technological and monetary shocks better mimics the economic fluctuations in two countries with very different cyclical properties namely france and the united states in our model monetary shocks are necessary to reproduce the standard deviation of output the money output correlation the labour productivity worked hours relative standard deviation the labour productivity worked hours correlation and the mark up output correlation with two independent shocks one real more specifically defined than the solow residual and one nominal the model gives an answer to some empirical puzzles which were left unexplained by traditional rbc models

is strike behavior cyclical we examine cyclicality of strike frequency and incidence using canadian data on strikes and contracts total strike frequency exhibits significant procyclicality to which within contract strikes contribute appreciably evidence is weaker for procyclical behavior of contract expiry strikes both in total and disaggregated by issue strike incidence is also procyclical particularly in manufacturing though the procyclicality here is confined to strikes over nonwage issues these results mirror those obtained by analyzing the frequency of strikes in the contract data industry specific cyclical variables positively affect strike incidence in manufacturing but region specific variables have no effect

wage bargaining with time varying threats 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 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

an empirical model of labor supply in a life cycle setting this paper formulates and estimates a structural intertemporal model of labor supply using theoretical characterizations derived from an economic model of lifetime behavior a two step empirical analysis yields estimates of intertemporal and uncompensated substitution effects which provide the information needed to predict the response of hours of work to life cycle wage growth and shifts in the lifetime wage path

an empirical study of the adverse selection model of strikes problems with existing empirical studies of the asymmetric information theory of strikes are 1 industry level data are used as proxies for firm level variables 2 studies using firm level data potentially suffer from simultaneity bias and 3 one of the key predictions of the theory is not tested the present paper addresses these issues while estimating a probit model of strike incidence using data comprising 2 459 contracts from canadian industry for 1964 85 that are merged with firm specific data under a number of alternative specifications results support the main predictions of the asymmetric information theory of strikes

the empirical relations between employers striker replacement strategies and strike duration this analysis of general accounting office survey data on strikes in 1985 and 1989 shows that employers permanent replacement of striking workers was associated with longer strikes than would otherwise have occurred furthermore the authors find that simply announcing the intent to replace strikers was also associated with longer strikes finally when employers permanently replaced strikers the probability of settlement fell approximately 30 these findings are consistent with models focusing on the joint costs of a strike and on private information in the bargaining process t o the firm that seeks to operate during a strike a major obstacle is securing a work force to do the work normally performed by members of the striking bargaining unit of the four possible strategies for securing such a work force reassigning struck work to non bargaining unit employees utilizing members of the bargaining unit who return to work during the strike hiring temporary replacement employees and hiring permanent replacement employees the strategy of hiring permanent replacements for strikers has become the most controversial before the passage of new deal labor legislation u s employers regularly exercised their common law right to replace striking workers the wagner act of 1935 protected employees right to strike but did not explicitly grant employers the right to replace strikers the supreme court however upheld the legality of permanently replacing strikers in its 1938 decision nlrb v mackay radio

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

strikes wages and private information private information models of strikes suggest that the strike is used as an information revealing device by the union in the presence of asymmetrical information a testable prediction of these models is that there is a negative relationship between strikes and the unpredicted component of the wage this paper finds evidence of such a relationship in a large sample of u s labor contracts the real wage falls by about 3 percent after a strike lasting one hundred days copyright 1989 by american economic association

labour unrest and the quality of production evidence from the construction equipment resale market this paper examines the construction equipment resale market to assess whether equipment produced by the world s largest manufacturer of construction machinery caterpillar experienced lower product quality in facilities that underwent contract disputes during the 1990 s analysis of auction data reveals that resale market participants significantly discounted machines produced in these dispute affected facilities additionally pieces of equipment produced in facilities undergoing unrest were resold more often received worse appraisal reports and had lower list prices taken together the evidence supports the hypothesis that workmanship at dispute affected facilities declined and that the resulting impact on the economic quality of the equipment produced was significant the dispute was associated with at least 400 million in lost service flows due to inferior quality equipment alone

controlling for endogeneity of strike variables in the estimation of wage settlement equations this article analyzes wage changes with an unbalanced panel from the spanish collective bargaining in large firms survey central to the analysis are the joint determination of strike and wage outcomes and in particular the estimation of the slope of the wage concession curve i control for the possible endogeneity of strike variables in the wage equation and suggest two sets of instruments lagged strike outcomes or reduced form predictions of the strike variables when controlling for endogeneity a negative relationship between strike duration and the size of the wage change arises however short strikes still produce higher wage changes

strike incidence in british manufacturing in the 1980s in british manufacturing during the 1980s about one in forty wage settlements involved a strike using data provided by the confederation of british industry the authors analyze the incidence of

conflict as a part of the bargaining process this paper investigates the use of conflict as a bargaining instrument it first revises the arguments explaining the role of confrontation as a source of information and its use during negotiations then it offers evidence illustrating this phenomenon by analyzing a sample of colonial and imperial wars the second part of the paper explores a bargaining model with one sided incomplete information parties can choose the scope of the confrontation they may want to engage in an absolute conflict that terminates the game or a limited conflict that only introduces delay and conveys information about the eventual outcome of the absolute one it is shown that confrontation has a double edged effect it may paradoxically open the door to agreement when the uninformed party is so optimistic that no agreement is feasible but it can also create inefficiency when agreement is possible but the informed agent has an incentive to improve her bargaining position by fighting

complementarity free riding and the military expenditures of nato allies abstract this paper examines the major influences of an ally s demand for military expenditures demand equations are estimated for a sample of nato nations using the iterative seemingly unrelated regressions technique evidence is presented indicating that structural changes occured in these equations in the early 1970s this instability is the predicted effect of the doctrine of flexible response adopted by nato during this time period the statistical tests show that the medium sized nuclear powers military expenditures responded identically to income and defense spillins the same held true for the lowland allies

logit estimates of strike incidence from canadian contract data logit estimates of strike incidence are made based on a unique and comprehensive data set of 2 437 collective agreements the appropriate level of aggregation since that is where bargaining occurs the results are interpreted through a theoretical framework emphasizing that strikes are more likely when the joint costs of using the strike mechanism are low relative to the cost of alternative mechanisms for achieving the same purposes such functions of strikes are to generate information elicit truth telling establish reputations provide catharsis and solve intraorganizational conflict

strategic delay in bargaining with two sided uncertainty the role of strategic delay is analyzed in an infinite horizon alternating offer model of bargaining a buyer and seller are engaged in the trade of a single object both bargainers have private information about their own preferences and are impatient in that delaying agreement is costly an equilibrium is constructed in which the bargainers signal the strength of their bargaining positions by delaying prior to making an offer a bargainer expecting large gains from trade is more impatient than one expecting small gains and hence makes concessions earlier on trade occurs whever gains from trade exist but due to the private information only after costly delay panmunjom korea upi the american general and the north korean general glared at each other across the table and the only sound was the wind howling across the barren hills outside their hut maj gen james b knapp negotiator for the united nations command unc was waiting for maj gen ri choonsun of the democratic people s republic of north korea to propose a recess they sat there arms folded for 42 hours not a word finally gen ri got up walked out and drove away evening bulletin philadelphia 11 april 1969

bargaining with incomplete information an infinite horizon model with two sided uncertainty the resolution of any bargaining conflict depends crucially on the relative urgency of the agents to reach agreement and the information each agent has about the others preferences this paper explores within the context of an infinite horizon bargaining model with two sided uncertainty how timing and information affect the rational behaviour of agents when commitment is not possible since the bargainers are uncertain about whether trade is desirable they must communicate some of their private information before an agreement can be reached this need for learning due to incomplete information about preferences results in bargaining inefficiencies trade often occurs after costly delay thus the model provides an explanation for the inefficient bargaining behaviour that appears to occur often in practice

dynamic bargaining with transaction costs a buyer and seller alternate making offers until an offer is accepted or someone terminates negotiations the seller s valuation is common knowledge but the buyer s valuation is known only by the buyer impatience to reach an agreement comes from two sources the traders discount future payoffs and there are transaction costs of bargaining equilibrium behavior involves either immediate trade delayed trade or immediate termination depending on the size of the gains from trade and the relative bargaining costs this contrasts with the pure discounting model where termination never occurs and the pure transaction cost model where delayed trade never occurs

nominal rigidity and monetary uncertainty abstract a stochastic macromodel with dynamically optimising wage setting households is used to examine the effect on current macroeconomic variables of an anticipated increase in variability of the money stock there is a nominal rigidity in the form of a money wage set one period in advance in whose absence monetary uncertainty has no effect on current variables we show that for plausible parameterisations monetary uncertainty combined with nominal rigidity raises the nominal interest rate depressing aggregate demand and hence current price and output it also causes the wage to be set higher increasing the natural rate of unemployment

exploration information and aec regulation of the domestic uranium industry abstract for roughly twenty years following the second world war the atomic energy commission was the only purchaser of domestically produced uranium such monopsony power implicitly allowed the atomic energy commission s to regulate the u s uranium industry this paper investigates the atomic energy commission s implicit regulation asking if an efficient allocation of resources was induced the main finding is that undesirably high levels of exploration were induced

cyclical fluctuations in strike durations canadian data on strikes between 1946 and 1983 are used to estimate linear regression models for the logarithm of completed duration a thorough investigation of the influence of the business cycle reveals strong support for the hypothesis that strike durations are countercyclical the cyclical effect is shown to be robust to both the choice of cyclical variable and the econometric specification and the magnitude of the effect is quite substantial experimentation with different representations of the cycle reveals that it is difficult to improve on a simple formulation involving a single continuous variable

bargaining enforcement and international cooperation neoliberals and their neorealist critics have debated the relative importance of two main obstacles to international cooperation problems of cheating and enforcement and problems of relative gains by contrast i argue that problems of international cooperation have a common strategic structure in which a third distinct obstacle plays a crucial role almost regardless of the issue area states must first resolve the bargaining problem of agreeing on terms before they can implement and begin to enforce an agreement furthermore the bargaining and enforcement problems interact using a game model i show that if states must bargain to determine the deal to be enforced the shadow of the future cuts two ways a high expectation of continued interactions may make enforcing the agreement easier but it can also give states an incentive to bargain harder delaying agreement in hopes of getting a better deal empirical evidence from trade and arms control negotiations suggests that this mechanism may help to explain the costly standoffs that are often observed in international politics and are problematic for received neoliberal theories

equilibria with communication in a job market example we study costless information transmission from a job applicant to an employer who must decide whether to hire him and if so which position to give him we construct equilibrium payoffs requiring at least two signaling steps or even that no deadline be imposed on the plain conversation the set of communication equilibrium payoffs achieved with the help of a communication device is larger than the set of equilibrium payoffs of the plain conversation game but coincides with the set of correlated equilibrium payoffs

taking sides in wars of attrition third parties often have a stake in the outcome of a conflict and can affect that outcome by taking sides this article studies the factors that affect a third party s decision to take sides in a civil or interstate war by adding a third actor to a standard continuous time war of attrition with two sided asymmetric information the third actor has preferences over which of the other two actors wins and for being on the winning side conditional on having taken sides the third party also gets a flow payoff during the fighting which can be positive when fighting is profitable or negative when fighting is costly the article makes four main contributions first it provides a formal framework for analyzing the effects of endogenous intervention on the duration and outcome of the conflict second it identifies a boomerang effect that tends to make alignment decisions unpredictable and coalitions dynamically unstable third it yields several clear comparative static results finally the formal analysis has implications for empirical efforts to estimate the effects of intervention showing that there may be significant selection and identification issues

a theory of exit in duopoly we develop a duopoly model in which exit occurs because of the existence of fixed costs or opportunity costs each firm enters the market knowing its own cost but not that of its opponent as times goes on each firm becomes increasingly pessimistic about the cost of its remaining rival the time of exit is the only strategic variable so that our model is a war of attrition in contrast to the classic war of attrition however we assume that with positive probability each firm s costs may be low enough that staying in forever is a dominant strategy thus our model unlike the classic one has a unique equilibrium

less fighting than expected experiments with wars of attrition and all pay auctions while all pay auctions are well researched experimentally we do not have much laboratory evidence on wars of attrition this paper tries to fill this gap technically there are only a few differences between wars of attrition and all pay auctions behaviorally however we find striking differences as many studies our experiment finds overbidding in all pay auctions in contrast in wars of attrition we observe systematic underbidding

persistency in sticky price models abstract nominal rigidities imply that nominal shocks have an impact effect which may be propagated by standard mechanisms however the nominal adjustment process may in itself be a propagation mechanism causing persistent effects of nominal shocks this may be caused by inertia in nominal wage and price adjustment arising due to input output networks or multiperiod nominal contracting as captured in models with staggered price wage decisions it has recently been contested whether staggering can account for persistency of any quantitative importance this paper reviews the theory and empirical evidence on this issue and it is concluded that staggering may be a quantitative important propagation mechanism

wage contract settlements in u s manufacturing a bstruactusing a large scale longitudinal micro data base this paper tests for the determinants of union wage settlements in manufacturing alternative specifications of wage change relationships were tested in data covering the years 1957 to 1980 among the most important determinants of union wage changes were the expected inflation rate inflationary surprises in indexed agreements incomes policy dummy variables and spillovers from key national agreements catch up effects from lagged inflationary surprises were not important in determining the size of new settlements

the sunk cost fallacy in penny auctions this article theoretically and empirically analyses behaviour in penny auctions a relatively new auction mechanism as in the us dollars or war of attrition players in penny auctions commit higher non refundable costs as the auction continues and only win if all other players stop bidding i first show that in any equilibria that does not end immediately players bid probabilistically such that the expected profit from every bid is zero then using two large data sets covering 166 000 auctions i calculate that average profit margins actually exceed 50 to explain this deviation i incorporate a sunk cost fallacy into the theoretical model to generate a set of predictions about hazard rates and player behaviour which i confirm empirically while players do slowly learn to correct this bias and there are few obvious barriers to competition activity in the market is rising and concentration remains relatively high

work stoppages and the theory of the offset factor evidence from the british columbian lumber industry one method of estimating losses resulting from work stoppages is to multiply the total number of man days lost during disputes by the average product of workers this statistic can be easily calculated using information typically available from government agencies but has obvious flaws for example the behavior of other firms not involved in disputes is ignored moreover when output is durable the impact on consumption is unknown since inventories can be used as buffers to assess the importance of these and other considerations i develop an alternative empirical framework and implement it using data from the british columbian lumber industry

multidimensional separating equilibria and moral hazard an empirical study of national football league contract negotiations this paper empirically tests for a multidimensional separating equilibrium in contract negotiations and tests for evidence of the moral hazard inherent in many contracts using contract and performance data on players drafted into the national football league from 1986 through 1991 we find evidence that players use delay to agreement and incentive clauses to reveal their private information during contract negotiations in addition our empirical tests of the moral hazard issue indicate that a player s effort level is influenced by the structure of his contract

reputation in repeated second price auctions abstract a model in which two bidders take part in a series of second price comon value auctions is examined the question of an optimal auction from an auctioneer s standpoint in a repeated auction setting is partially addressed it is shown that the results from single auction models do not carry over to repeated auctions when one of the bidders is endowed with a reputation for bidding aggressively second price auctions with two bidders are highly susceptible to manipulative behaviour by an aggressive bidder and yield much lower revenues to the auctioneer

strikes are more common in countries with majoritarian electoral systems strikes are more common in those oecd countries where the legislature is elected in single member districts smd than in those where it is elected by proportional representation pr furthermore more working days are lost due to industrial conflict in countries with smd i suggest a politico economic explanation for these rarely noticed empirical regularities further empirical testing including controls drawn from previous strike research reveals that they hold up in a variety of econometric specifications

dynamic bargaining with action dependent valuations abstract an infinite horizon dynamic bargaining model is presented in which actions affect the expected future value of the buyer seller match because actions directly affect the future surplus to be bargained over the model is unlike other models that tie the dynamic process to nature alone focusing on a subset of weak markov equilibria several results come about that are not found in static bargaining models using similar bargaining protocols in particular optimal price demands can be lower higher than the buyer s lowest highest possible valuation and several empirical features concerning wage settlements and strike incidence from labor union contract negotiations can be explained

on equilibrium in resource markets with scale economies and stochastic prices abstract in this paper i show the existence and the characteristics of equilibrium in a non renewable resource market where extraction costs are non convex and market price is subject to stochastic shocks an empirically relevant setting in my model firms may be motivated to hold inventories to facilitate production smoothing which allows them to continue producing at a smooth pace at any instant when extraction ceases e g when reserves are exhausted this aspect of the model then supports a competitive equilibrium in the presence of non convex costs casual empirical evidence is provided that supports the central features of my model for a variety of non renewable resources lending credence to the explanation for equilibrium i propose

repeated bargaining with persistent private information the paper analyses repeated contract negotiations involving the same buyer and seller where the contracts are linked because the buyer has persistent but not fully permanent private information the size of the surplus being divided is specified as a two state markov chain with transitions that are synchronized with contract negotiation dates equilibrium involves information cycles triggered by the success or failure of aggressive demands made by the seller because there is persistence in the markov chain generating the surplus a successful demand induces the seller to make another aggressive demand in the next negotiation since the buyer s acceptance reveals that the current surplus is large rejection of an aggressive demand on the other hand leads the seller to be pessimistic about the size of the surplus in the next contract so the seller makes a soft offer that is sure to be accepted then after several such offers have been accepted the seller is optimistic enough to again make an aggressive demand creating an information cycle an interesting feature of this cycle is that the soft price is not constant but declines as the cycle continues so as to offset the buyer s option value of re starting the cycle when the current state is bad an explicit mapping is given for the relationship between the basic parameters and the equilibrium prices and quantities in particular there is a closed form solution for the threshold belief that makes the seller indifferent between hard and soft offers

monopolistic competition and the effects of aggregate demand how important is monopolistic competition to an understanding of the effects of aggregate demand on output we ask the question at three levels can monopolistic competition by itself explain why aggregate demand movements affect output can it together with other imperfections generate effects of aggregate demand in a way that perfect competition cannot if so can it give an accurate account of the response of the economy to aggregate demand movements the answers are no yes and yes

a bargaining model with incomplete information about time preferences etude d un jeu de negociation strategique sequentiel avec information incomplete caracterisation d une classe d equilibres sequentiels appeles equilibres sequentiels de negociation et demonstration de l unicite de cet equilibre

bargaining power strike durations and wage outcomes an analysis of strikes in the 1880s strike outcomes in the 1880s had a winner take all character successful strikes ended with a discrete wage gain failed strikes ended with a return to work at the prestrike wage we present a theoretical interpretation of these outcomes based on a war of attrition model we fit an empirical model specifying the capitulation times of the two parties and the size of the wage gain in the event of a strike success the results show a systematic relation between the determinants of strike success and the determinants of the wage gain for a successful strike

difficult choices crossing the picket line during the 1987 national football league strike this study examines the difficult choice faced by members of a striking bargaining unit between withholding labor or crossing the picket line in violation of the prevailing behavioral norm using duration analysis we test a model of crossing behavior using data on individual football players during the 1987 national football league strike a notable finding is that nonwhite players are less willing to cross the picket line if their team union representative is also nonwhite willingness to cross the line is also influenced by teammate crossing and proxies for expected career length demand for current income and expected benefits from union demands

bargaining with common values this paper examines a bargaining model with asymmetric information in which the private valuations of the two bargaining agents are correlated it shows that equilibria in such models typically exhibit a significant probability of a significant delay to agreement the paper characterizes the unique perfect bayesian equilibrium to the game in which an uninformed buyer makes offers to a privately informed seller it also shows by example that in this framework bargainers may rationally break off negotiations even in the presence of commonly known gains from trade

strategic bargaining models and interpretation of strike data attrition screening and signalling models of strategic bargaining are characterized in terms of their predictions about the incidence mean duration and settlement rates of strikes and the terms of wage settlements these predictions are compared with the general features observed in empirical studies of strikes in canada and the united states conclusions are drawn about the types of models capable of generating these features and about the conformity of the models to the evidence methods are described for computing the numerical examples used to illustrate the models

an empirical test of an asymmetric information model of strikes recent developments in the theory of strategic bargaining demonstrate how informational asymmetries can lead to prolonged and costly bargaining these models can be applied to contract negotiations yielding an economic theory of strikes to date however few empirical tests of these models have been carried out in this paper a set of predictions concerning the incidence and unconditional duration of strikes is derived from a simple bargaining model in which the union is uncertain about the firm s future profitability these predictions are then tested on a micro data set of major u s contract negotiations that took place from 1973 to 1977

exploration information and regulation in an exhaustible mineral industry abstract the paper presents a model of exploration and production in an uncertain environment exploration provides a by product of information that helps predict future finds more accurately when this information is not equally valued at the margin by society and industry socially inefficient levels of exploration are chosen by industry in this event government intervention may be warranted a regulator could control future prices to encourage industry to select socially preferred levels of production and exploration alternatively by making public varying amounts of exploration information incentives to industry could be adjusted conditions where such regulation might yield sufficient gains to society to offset regulatory costs are considered

the determinants of u s labor disputes we present a bargaining model of union contract negotiations in which the union decides between two threats the union can strike or it can continue to work under the expired contract the model makes predictions about the level of dispute activity and the form disputes take strike incidence increases as the strike threat becomes more attractive because of low unemployment or a real wage drop we test these predictions by estimating logistic models of dispute incidence and dispute composition for negotiations from 1970 to 1989 we find support for the model s key predictions but these associations are weaker after 1981

can strategic bargaining models explain collective bargaining data much effort has recently been devoted to the development of strategic models of bargaining with private information at the same time empirical analyses of data on collective bargaining in the labor market have generated an interesting list of facts to be explained in this paper we assess the prospective interactions between these theoretical and empirical developments the style here is expository detailed arguments have been ruthlessly suppressed a more complete treatment can be found in our 1989 article the theoretical models deal with conflicts between rational bargainers in situations where at least one of the bargainers has private information as in the case where an employer knows more about the value of labor s product than the workers do we start by explaining why private information is important in building models of strikes in a naive model of collective bargaining the union starts with a tough demand and

uncertainty and delay in bargaining this paper investigates the relationship between uncertainty and delay of agreement in the one sided offer bargaining model with two sided uncertainty where the seller makes offers we construct a weak stationary equilibrium in which different types of the seller charge different prices in every period we completely characterize the separating equilibrium by three regularity conditions and show that the time interval between offers converges to zero the seller s initial price offer in a separating equilibrium converges with probability 1 to the lowest valuation of the buyer if and only if the gain from trading is common knowledge we have witnessed a proliferation of sequential bargaining models that with a few remarkable exceptions fudenberg and tirole 1983 cramton 1984 and chatterjee and samuelson 1987 are based on models with one sided uncertainty the importance of studying bargaining models with one sided uncertainty is that despite their highly special informational structure we can derive valuable insights into the role of uncertainty in the delay in reaching an agreement while keeping the computational exercise tractable however the assumption of one sided uncertainty essentially excludes the situation where the buyer s actual reservation value is lower than the seller s actual reservation value though they are still engaged in the bargaining process the primary objective of this paper is to investigate the role of uncertainty about the gain from trading in a sequential bargaining model with two sided incomplete information in the models with one sided incomplete information important studies fudenberg levine and tirole 1985 and gul sonnenschein and wilson 1986 are often based on weak stationary equilibria where the equilibrium strategy of each player only depends upon the posterior conjecture about the other player and the previous period s offer although the importance of two sided uncertainty and the weak stationary equilibrium is well recognized previous research on sequential bargaining models has not combined the two features within the same framework studies on the models under two sided uncertainty have not focused on weak stationary equilibria for example cramton 1984 computes a specific sequential equilibrium with interesting properties in which the equilibrium strategies of both players depend upon histories in a rather complex fashion on the other hand it is only in models under one sided uncertainty that the weak stationary equilibrium has been extensively studied this paper computes and analyzes the weak stationary equilibria in a model under two sided uncertainty in order to investigate the effect of uncertainty on the delay in agreement we will extend the results from previous studies of one sided uncertainty models the computation of the equilibrium in models with two sided uncertainty is generally very complicated furthermore we must identify a sensible outcome if more than one equilibrium exists in the model to simplify the analysis we choose a standard bargaining

the generalized war of attrition abstract we model a war of attrition with n k firms competing for n prizes in a natural oligopoly context the k 1 lowest value firms drop out instantaneously even though each firm s value is private information to itself in a standard setting context in which every competitor suffers losses until a standard is chosen even after giving up on its own preferred alternative each firm s exit time is independent both of k and of other players actions our results explain how long it takes to form a winning coalition in politics solving the model is facilitated by the revenue equivalence theorem jel d43 d44 l13 o30

duration to first job and the return to schooling estimates from a search matching model this paper investigates the properties of the joint distribution of the duration to the first post schooling full time job and of the accepted wage for that job within a search matchingbargaining theoretic model the model provides an interpretation of the observations on duration to first job and accepted wages that differentiates between behavioural influences and market fundamentals in determining the accepted wage schooling relationship the return to schooling is appropriately measured by differences in the wage offer distribution which depends only on market fundamentals we use data from the 1979 youth cohort of the national longitudinal surveys of labor market experience to follow several school leaving cohorts of young males a model which allows for five types of heterogeneous workers within schooling race groups fits the duration and wage data well for all such groups offer probabilities for all groups are estimated to be close to one mean offered wages are about 1000 less than mean accepted wages and the internal annual rate of return for attending college relative to graduating from high school is 32 for blacks and 17 for whites this paper investigates the properties of the joint distribution of the duration to the first post schooling full time job and of the accepted wage for that job within a search matching bargaining model it is a well established empirical regularity that hazard rates are decreasing with the duration of search unemployment it is also true for the data we use that the sample mean of the accepted wage associated with the first job is not increasing with duration these findings hold for both black and white male youth at all levels of schooling conditional on schooling however the time between leaving school and working at the first full time job is longer for blacks and their accepted mean wage is lower conditional on race the time between leaving school and working at the first full time job is shorter for those with higher levels of schooling and their accepted mean wage is higher interestingly blacks display a similar pattern of duration and accepted wages to whites who are one level of schooling below e g black high school graduates and white high school dropouts

strikes and wages a test of an asymmetric information model this paper describes a simple model of labor disputes based on the hypothesis that unions use strikes to infer the profitability of the firm the model posits the existence of a negatively sloped resistance curve between wages and strike duration in addition it offer a series of predictions relating wage and strike outcomes to changes in the expected profitability of the firm and changes in the alternative opportunities of striking workers these implications are tested using data on wage outcomes strike probabilities and strike durations for a large sample of collective bargaining agreements

market competition and strike activity we develop a model of wage bargaining with private information in a duopoly we investigate how product differentiation and market competition bertrand vs cournot competition affect wages and strikes if bargaining takes place at the industry level then both the wage outcome and the strike activity do not depend on the degree of product differentiation whatever the type of market competition however if bargaining takes place at the firm level then wages and strikes are increasing with the degree of product differentiation and the strike activity is smaller under bertrand than under cournot competition

endogenous capacity utilization and macroeconomic persistence abstract this paper presents a monetary dynamic general equilibrium model featuring a strong internal propagation mechanism limited short run factor substitutability and idiosyncratic demand uncertainty play a prominent role in the results firms are ex post heterogeneous and a well defined distribution of capacity utilization rates characterizes the equilibrium of the model the economy responds gradually to aggregate shocks since firms with excess capacity can raise production without experiencing large increases in their marginal costs the modeling framework presented in this paper offers a plausible microeconomic interpretation for reduced form mark up shocks typically considered in the new keynesian literature

optimising agents staggered wages and persistence in the real effects of money shocks in this paper we incorporate taylor s 1979 staggered wage setting into an optimising dynamic general equilibrium framework to study whether staggered wages could induce a high degree of persistence in the real effects of money shocks we conclude that high persistence is an unlikely outcome sensible values of the microeconomic parameters and or a moderate rate of underlying inflation imply a low degree of persistence furthermore once explicit microfoundations are taken into account we show that i the model is highly non linear ii the inertia of the system is inversely related to the level of average inflation

an investigation into the determinants of u s strike activity this paper outlines the steps involved in constructing a new panel dataset of u s contract negotiations and strike activity this data set has a much broader coverage of firms and unions than micro data sets analyzed to date key findings include the discovery that the variability and not the level of firm profitability affects the probability of a strike personal characteristics of the union workforce also emerge as key determinants of strike activity finally strikes are found to be more likely when the local labor market is tight but less likely when the industry labor market is tight copyright 1986 by american economic association

a multistage model of bargaining this paper presents a simple multistage model of bargaining wherein a seller makes an offer that can be either accepted or refused if rejected the process continues how the seller s ability to make commitments affects bargaining outcomes is analysed by comparing the commitment equilibria to those arising when commitment is impossible the effects of increasing uncertainty about preferences and varying the length of the bargaining horizon are analysed the ways in which the bargaining environment can be changed to improve outcomes are discussed

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

on delay in bargaining with one sided uncertainty recently attention has been given to a model of two person bargaining in which the parties alternate making offers and there is uncertainty about the valuation of one party the purpose of the analysis has been to identify delay to agreement with a screening process where agents with relatively lower valuations distinguish themselves by waiting longer to settle we point out a fundamental difficulty with this program by demonstrating that the assumptions used in the literature allow for delay only in so far as the time between offers is significant

uncovering regulators social welfare weights this article describes a procedure that can be used to infer interesting information about the preferences of regulators from the pricing decisions they make this is done by using an adaptation of the familiar ramsey pricing model which allows benefits derived from the consumption of different goods or derived by different consumers to carry different social weights these weights are then exposed by inverting the first order conditions of the constrained maximum problem

strikes and labor organization in hybrid regimes xisting theories of labor protest depend on independent organizations representing workers however in many countries most workers are either not organized at all or are in labor unions intended for control not representation this is particularly the case in partially liberalized or hybrid regimes where despite the introduction of electoral competition autonomous democratic organizations representing labor are not well developed yet such workers do protest drawing on an original new datasetfrom one hybrid regime post communist russia i develop a theory of labor protest and of the institutional mechanisms used by elites to influence it instead of being a function of union membership or characteristics of the information environment as the existing literature would have it protest occurs when it is in the interest of powerful elements of the elite or when economic conditions are truly desperate e

wage bargaining labor turnover and the business cycle a model with asymmetric information 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

the effects of public policy on strike duration hazard function estimates are utilized to analyze the effect of numerous public policy variables on strike duration based on 7 546 strikes in canada between 1967 and 1985 we find that only the mandatory strike vote substantially reduced conditional duration however the policy variables generally had a more favorable effect on reducing strike incidence so that on net they tended to reduce unconditional duration incidence times conditional duration specifically reduced unconditional duration was associated with the existence of conciliation and the requirement of a mandatory strike vote but the prohibition on replacement workers had a perverse effect