Product Market Integration, Wage Bargaining and Strike Activity

We develop a spatial two-country model of wage determination with private information in unionized imperfectly competitive industries. We investigage the effects of separated product markets opening up for competition as well as of further market integration on the negotiated wage and the strike activity. We show that, when product markets are separated, the wage level and the strike activity are decreasing with the transportation cost and the home market size. However, when markets are integrated, wages and strikes are now increasing with the transportation cost. Finally, we find that the opening of markets for competition has an ambiguous impact on both the negotiated wage and the strike activity.economic integration;horizontal differentiation;product market competition;wage bargaining;strike activity

Union Delegation and Incentives for Merger

We analyze a unionized duopoly model to examine how unions affect the incentives for merger. We find that, once the union has the option to delegate, an increase in the union bargaining power can create incentives for the firms to merge.Union delegation;Wage bargaining;Mergers

Strategic Union Delegation and Strike Activity

We develop a model of wage determination with private information, in which te union has the option to delegate the wage bargaining to either surplus-maximizing delegates or to wage-maximizing delegates (such as senior union members). We show that the strike activity is greater whenever the union chooses wage-maximizing delegates instead of surplus-maximizing delegates. We also provide the necessary and sufficient condition such that it is always optimal for the union to choose wage-maximizing delegates and we we find that the efficiency loss due to strategic delegation may be quite important.Union delegation;Wage bargaining;Private information;Strike activity

Von Neumann-Morgenstern farsightedly stable sets in two-sided matching

We adopt the notion of von Neumann-Morgenstern (vNM) farsightedly stable sets to determine which matchings are possibly stable when agents are farsighted in one-to-one matching problems. We provide the characterization of vNM farsightedly stable sets: a set of matchings is a vNM farsightedly stable set if and only if it is a singleton subset of the core. Thus, contrary to the vNM (myopically) stable sets [Ehlers, J. of Econ. Theory 134 (2007), 537-547], vNM farsightedly stable sets cannot include matchings that are not in the core. Moreover, we show that our main result is robust to many-to-one matching problems with substitutable preferences: a set of matchings is a vNM farsightedly stable set if and only if it is a singleton set and its element is in the strong core.Matching problem, von Neumann-Morgenstern stable sets, farsighted stability

Bargaining with Endogenous Deadlines

We develop a two-person negotiation model with complete information which makes endogenous both the deadline and the level of surplus destruction after the deadline. We show that the equilibrium outcome is always unique but might be inefficient. Moreover, as the bargaining period becomes short or as the players become very patient, the unique outcome is always inefficientbargaining;alternating-offers;deadlines;complete infomation

Rationalizability for Social Environments

Social environments constitute a framework in which it is possible to study how groups of agents interact in a society. The framework is general enough to analyse both non-cooperative and cooperative games. We identify a number of shortcomings of existing solution concepts that are used for social environments and propose a new concept called social rationalizability. The concept aims to identify the consequences of common knowledge of rationality and farsightedness within the framework of social environments. The set of socially rationalizable outcomes is shown to be non-empty for all social environments and it can be computed by an iterative reduction procedure. We introduce a definition of coalitional rationality for social environments and show that it is satisfied by social rationalizability

Profit-Sharing: Does It Reduce Bargaining Inefficiencies ?

Within an incomplete information framework, we develop a model of wage determination in a unionized Cournot oligopoly. The assumption of incomplete information allows the possibility of strikes, which waste industry potential ressources, at equilibrium. Facing such deadweight loss, the government or the social planner may decide to adopt a policy, like a profit-sharing scheme. Under two different bargaining structures (firm-level vs industry-level), we investigate the effects of adopting profit-sharing on the wage outcome and the bargaining inefficiencies, like strikes. Our main results are as follows. If the base wage bargaining takes place at the industry-level, then the introduction of a profit-sharing scheme increases the bargaining inefficiencies. But if the base wage bargaining takes place at the firm-level and the number of firms in the industry is greater than two, then the introduction of a profit-sharing scheme reduces the bargaining inefficiencies.Wage bargaining; profit-sharing; incomplete information; strikes

On Rationalizability in Two-Person Alternating-Offer Bargaining

This paper reconsiders Rubinstein's alternating-offer bargaining game with complete information. We define rationalizability for multi-stage games with observed actions. Whe show that rationalizability does not exclude perpetual disagreement or delay. Then, we define trembling-hand rationalizability and we show that it implies a unique solution. Moreover, this unique solution is the subgame perfect equilibrium. We also reconsider an extension of Rubinstein's game wherein there is a smallest money unit.bargaining; alternating-offer; rationalizability; money unit

Debt Valuation and Marketability Risk

This paper studies the valuation of corporate debt contracts in an intertemporal setting under uncertainty taking into account the possibility that the bondholder will be unable to sell his asset. The model considers a coupon paying debt contract with default risk in a binomial setting. Randomly matched investors who place different values upon the firm in bankruptcy bargain for the price of the asset in a secondary market. With this framework we are able to isolate the influence of liquidity risk in the pricing of risky debt contracts. This influence is shown to be function of the heterogeneity of investors' valuations and the range of uncertainty concerning potential bankruptcy costs. In particular, even though mean bankruptcy costs may be relatively low, uncertainty about them can generate relatively large spreads. Furthermore this model is capable of generating a large variety of shapes for the term structure of yield spreads. Finally, the model captures the fact that early after the issue, a bond is relatively liquid and later becomes relatively illiquid depending on the underlying asset value.Corporate bonds; default risk; bankruptcy; liquidity risk