Wage bargaining with discount rates varying in time under different strike decisions
We present a non-cooperative union-firm wage bargaining model in which the union must choose between strike and holdout if a proposed wage contract is rejected. The innovative element that our model brings to the existing literature on wage bargaining concerns the parties’ preferences which are not expressed by constant discount rates, but by sequences of discount factors varying in time. First, we determine subgame perfect equilibria if the strike decision of the union is exogenous. We analyze...