Forward induction in a wage repeated negotiation

• Autores: Vicente Calabuig, Gonzalo Olcina Vauteren
• Localización: Working papers = Documentos de trabajo: Serie AD, Nº. 16, 1997
• Idioma: inglés
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• Resumen

  • We present a finitely repeated bargaining game with complete information. The stage game is a simultaneous demand game with a fall-back position for both parties, in which we allow one party (say, the union) to estabilish a credible commitment to strike if it is not offered a determined wage. We try to refine the equilibrium set of the repeated game using a formulation of Forward Induction. In particular, we say that a path of Nash Equilibria in the repeated game is Consistent with Forward Induction (CFI) if for all period t the cost of deviation (if it is strictly positive) is greater or equal than the maximal net gain in CFI paths with t-1 horizon. We present several cases in which the average payoff for the union in any CFI path, when the horizon tends to infinity, is his preferred wage. These results are similar to those obtained with the reputation effects approach and reveal some connection between the FI notion and the approach consisting of perturbing the game with some incomplete information.