The Kalai-Smorodinsky Solution in Labor-Market Negotiations

• DOI: 10.2139/ssrn.413844
• Publication Date: 2021-11-17T03:53:12Z
• Authors: Thorsten Upmann; Anke Gerber
• Keywords: 0502 economics and business; 05 social sciences

Authors who consider efficient bargaining on the labor market predominantly focus Nash-bargaining solution. It seems, however, that actual negotiations between an employers' federation and a union are often characterized by mutual concessions, which may be accounted for application of Kalai-Smorodinsky solution to labor-market negotiations. Correspondingly, we investigate how government can influence equilibrium changing reservation wage when is determined We find induced employment effects differ substantially compared with Nash Hence, substituting not innocuous, incremental concessions.