Bargaining, binding contracts, and competitive wages.
type: Item
instance of: scholarly article
title: Bargaining, binding contracts, and competitive wages.
zbMATH Open document ID: 1048.91055
DOI: 10.1016/S0899-8256(03)00007-1
author: Andreas Westermark
published in: Games and Economic Behavior
publication date: 2003-07-30T00:00:00Z
review text: 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.
reviewed by: Xianping Guo
Mathematics Subject Classification ID: 91B26
Mathematics Subject Classification ID: 91B40
zbMATH DE Number: 1956994
zbMATH Keywords: decreasing returns
MaRDI profile type: Publication
cites work: Bargaining Foundations of Shapely Value
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description: scientific article; zbMATH DE number 1956994