Efficiency and behavioral considerations in labor negotiations

• Published in: Journal of economic psychology Vol. 31; no. 4; pp. 599 - 611
• Main Authors: Königstein, Manfred, Villeval, Marie Claire
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.08.2010; Elsevier; Elsevier Sequoia S.A
• Series: Journal of Economic Psychology
• Subjects: Bargaining; Bargaining agenda; Bargaining agenda Efficient contracts Right-to-manage Social preferences Experiment; Biological and medical sciences; Economic behaviour; Economic psychology; Economics and Finance; Efficient contracts; Experiment; Experiments; Fundamental and applied biological sciences. Psychology; Game theory; Humanities and Social Sciences; Labor negotiations; Labour market flexibility; Microeconomics; Payoffs; Preferences; Psychology. Psychoanalysis. Psychiatry; Psychology. Psychophysiology; Right-to-manage; Social interactions. Communication. Group processes; Social preferences; Social psychology; Studies; Efficient contracts; C78; D03; J52; Experiment; J51; 3020; Bargaining agenda; 3040; Right-to-manage; C91; C72; Social preferences; Human; Social preference; Choice; Experimental study; Social interaction; Bargaining; Behavior
• ISSN: 0167-4870; 1872-7719
• DOI: 10.1016/j.joep.2010.04.003

Experimental literature has shown that social preferences influence how individuals bargain and make sharing decisions. It usually considers situations in which individuals negotiate on a single issue. This paper explores a different environment and reports on an experiment based on a non-cooperative game in which the choice of the bargaining agenda is endogenous. We find that firms reveal a strong preference for single-issue bargaining although the subgame perfect equilibrium predicts the choice of the multi-issue bargaining. In multi-issue bargaining unions offer smaller relative payoff shares to firms than in single-issue bargaining and this leads to a higher conflict rate than in a single-issue bargaining. Social preferences and a concern for relative payoffs support this preference for a restricted bargaining agenda but they induce a loss of efficiency.