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IMMEDIATE SETTLEMENT OR ENDURING A STRIKE: THE CHOICE OF SIGNALS
Author(s) -
Yao Zhiyong
Publication year - 2015
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/boer.12007
Subject(s) - negotiation , settlement (finance) , private information retrieval , economics , microeconomics , revenue , stochastic game , signalling , labour economics , finance , political science , law , computer science , computer security , payment
ABSTRACT Some labour contract negotiations involve strikes while most conclude with immediate settlement. This article offers a model of union‐firm negotiation with private information to show that either strikes or immediate settlement will take place in the equilibrium. Different from most signalling literature where the signals are exogenously given, this article endogenizes the choice of signals. We compare two signals, the employment level and the strategic delay. We show that the low‐revenue firm will choose the signal which gives it higher payoff while separating itself from the high‐revenue firm.