Holdout threats during wage bargaining

Abstract

We investigate a wage bargaining between a union and a firm where the parties’ preferences are expressed by varying discount rates and the threat of the union is to be on go-slow instead of striking. First, we describe the attitude of the union as hostile or altruistic where a hostile union is on go-slow in every disagreement period and an altruistic union never threatens the firm and holds out in every disagreement period. Then we derive subgame perfect equilibria of the bargaining when the union’s attitude is determined exogenously. Furthermore, we determine necessary conditions for the equilibrium extreme payoffs of both parties independently of the union’s attitude and calculate the extreme payoffs for a particular case when the firm is at least as patient as the union.