revised version published as 'Efficiency and Behavioral Considerations in Labor Negotiations' in: Journal of Economic Psychology, 2010, 31 (4), 599-611.
The labor economics literature has shown that the "efficient bargaining" model, in which wage
and employment are negotiated simultaneously, is less frequently used on unionized markets
than the less efficient "right-to-manage" model, in which wage is determined via bargaining
and employment determined subsequently and unilaterally by the firm. This paper reports an
experiment in which the choice of the bargaining agenda is endogenous within a
noncooperative game. We find that participants show a preference for decision authority and
choose single-issue bargaining in most cases even though efficiency is lower than in multiissue
bargaining. Furthermore, multi-issue bargaining induces unions to offer smaller payoff
shares and leads to a higher conflict rate than in a single-issue bargaining.
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