Intra firm bargaining and shapley values

BjÖRn BrÜGemann, Pieter Gautier, Guido Menzio

    Research output: Contribution to journalArticle

    Abstract

    We study two wage bargaining games between a firm and multiple workers. We revisit the bargaining game proposed by Stole and Zwiebel. We show that, in the unique Subgame Perfect Equilibrium, the gains from trade captured by workers who bargain earlier with the firm are larger than those captured by workers who bargain later, as well as larger than those captured by the firm. The resulting equilibrium payoffs are different from those reported in Stole and Zwiebel as they are not the Shapley values. We propose a novel bargaining game, the Rolodex game, which follows a simple and realistic protocol. In the unique no-delay Subgame Perfect Equilibrium of this game, the payoffs to the firm and to the workers are their Shapley values.

    Original languageEnglish (US)
    Pages (from-to)564-592
    Number of pages29
    JournalReview of Economic Studies
    Volume86
    Issue number2
    DOIs
    StatePublished - Jan 1 2019

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    Keywords

    • Intra firm bargaining
    • Shapley value

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    BrÜGemann, BR., Gautier, P., & Menzio, G. (2019). Intra firm bargaining and shapley values. Review of Economic Studies, 86(2), 564-592. https://doi.org/10.1093/restud/rdy015