Journal Article

Bargaining over a Menu of Wage Contracts

Gyu Ho Wang

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 65, issue 2, pages 295-305
Published in print April 1998 | ISSN: 0034-6527
Published online April 1998 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1111/1467-937X.00045
Bargaining over a Menu of Wage Contracts

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We investigate an infinite horizon bargaining problem in which a firm and a worker bargain over two dimensions, quality and wage. The worker has private information about his type. Only the uninformed firm makes an offer and it can offer a menu of quality-wage contracts instead of single one. We show that for all discount factors, the unique sequential equilibrium outcome is separating without delay; the firm separates the types of worker with a menu of contracts in the first period. Our result shows that in multi-dimensional bargaining, the “Coase Conjecture” holds in the sense that the game ends in the first period. But it fails in the sense that the uninformed party can preserve the entire bargaining power.

Journal Article.  0 words. 

Subjects: Economics

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