Bargaining, binding contracts, and competitive wages. (Q1399518)

In a model where many workers bargain with one firm and sign binding contracts, the existence of a stationary subgame perfect equilibrium is shown. If the production function satisfies decreasing returns, each worker receives a share of his marginal product (treating all other workers as employed) in equilibrium. Thus, wages are competitive. This is in contrast to \textit{L. A. Stole} and \textit{J. Zweibel} [Rev. Econ. Stud. 63, 375--410 (1996; Zbl 0855.90015)], who assume that contracts are non-binding and find that the payoff of a worker is a weighted average of the inframarginal contributions. Hence, binding contracts imply lower wages than non-binding contracts.