Applications of Bargaining Models

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The proposed work comprises several topics in the application of bargaining theory to empirical studies of strikes and other disputes. The aim is further development of bargaining models useful for econometric studies and for policy analysis. Among these topics are: the effect of pre-strike negotiations on the frequency of strikes; elaboration of the predictions of attrition, screening, and signaling models of bargaining, as well as extensions to include cases with reservation wages dependent on employment levels; explanatory mechanisms for the procyclic incidence and settlement rates observed in strike data; and development of bargaining models and specifications of unobserved heterogeneity adapted to econometric estimation. Data from previous studies is used to estimate a bargaining model. Subsidiary topics include application of bargaining theory to legal provisions in general bargaining models, and several related technical issues in the general formulation, analysis, and computation of game-theoretic models. This project is extremely important because it provides new insights into the nature of strikes and because it makes bargaining models more useful for empirical research. The project links a large body of empirical research based so far on simple models or data description to rigorous theories of bargaining showing conditions under which strikes would occur. This will be one of the first efforts to use rigorous theory to explain empirical observations and the empirical observations to test the theories. Bargaining theory is one of the major tools used by economic theorists to study a wide range of economic phenomena, so the improvements this project will make in bargaining theory will benefit a number of areas of economic research.