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Intra-firm Bargaining under Non-binding Contracts

Intra-firm Bargaining under Non-binding Contracts We present a new methodology for studying the problem of intra-firm bargaining, based on the notion that contracts cannot commit the firm and its agents to wages and employment. We develop and analyse a general non-cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party. Equilibrium firm profits are characterizable as both a weighted average of a neo-classical (non-bargaining) firm's profits and a generalization of Shapley value for a corresponding cooperative game. Furthermore, the resulting payoffs induce economically significant distortions in the firm's input and organizational-design decisions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Economic Studies Oxford University Press

Intra-firm Bargaining under Non-binding Contracts

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References (31)

Publisher
Oxford University Press
Copyright
© Published by Oxford University Press.
ISSN
0034-6527
eISSN
1467-937X
DOI
10.2307/2297888
Publisher site
See Article on Publisher Site

Abstract

We present a new methodology for studying the problem of intra-firm bargaining, based on the notion that contracts cannot commit the firm and its agents to wages and employment. We develop and analyse a general non-cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party. Equilibrium firm profits are characterizable as both a weighted average of a neo-classical (non-bargaining) firm's profits and a generalization of Shapley value for a corresponding cooperative game. Furthermore, the resulting payoffs induce economically significant distortions in the firm's input and organizational-design decisions.

Journal

The Review of Economic StudiesOxford University Press

Published: Jul 1, 1996

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