Strategic bargaining with firm inventories

Melvyn Coles, Eric Smith

Research output: Contribution to journalArticle

Abstract

This paper characterizes how a firm's opportunity to sell from its stock of inventories affects the outcome of strategic wage negotiations with a union of workers. In equilibrium, the union and firm share the benefits from an immediate return to work less the costs of a strike of infinite duration. This outcome is equivalent to a Nash bargaining solution in which the threat points are the agents' expected payoffs should a strike last forever. We also demonstrate that for a given level of inventories, the wage increases when demand is high. Conversely, given demand, the wage falls as inventories rise.

Original languageEnglish (US)
Pages (from-to)35-54
Number of pages20
JournalJournal of Economic Dynamics and Control
Volume23
Issue number1
DOIs
StatePublished - Sep 17 1998

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Keywords

  • C73
  • C78
  • Dynamic games
  • Inventories
  • Noncooperative bargaining
  • Stochastic games

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics

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