Empirical Applications of Strategic Bargaining Models

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This project continues a line of research on bargaining behavior. The specific purpose of this study is to apply recently developed strategic theories of bargaining with private information to data on wage settlements and strike duration. The broader aim of this research is to develop a theoretical framework which is consistent with the facts, and which can eventually lead to systematic empirical analyses of important policy issues in collective bargaining. Some of these policy issues include the treatment of eligibility for unemployment compensation and other welfare benefits for striking workers, and proposals to mandate cooling off periods before a strike can commence. The core of the research is a model of repeated negotiations in which the firm has private information which includes both transient and permanent components. This model will be applied to a sequence of labor contracts negotiated by each bargaining pair with a view to explaining empirical results showing that strike incidence and duration in the last contract negotiation have a substantial effect on whether a strike occurs in the current negotiation. The model will be tested with a sample of U.S. and Canadian labor contracts.