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Bargaining and hold-up : the role of arbitration
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Gabuthy, Yannick and Muthoo, Abhinay (2018) Bargaining and hold-up : the role of arbitration. Working Paper. Coventry: University of Warwick. Department of Economics. Warwick economics research papers series (WERPS) (1173). (Unpublished)
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Official URL: https://warwick.ac.uk/fac/soc/economics/research/w...
Abstract
This paper analyses arbitration as a surrogate for complete contracts. We embed this idea in a simple model of a long-term relationship between a firm and its workforce, in which they can make productive-enhancing, relationship- specific investments, and then negotiate over the division of the resultant sur- plus. It is shown that the mere presence of the arbitrator (in the background of negotiations) may enhance investment incentives ex-ante by minimising each party's ability to engage in hold-up behaviours ex-post. Furthermore, we highlight notably that the partners should optimally commit to call an arbi- trator ensuring a compromise by awarding a reasonable share of the surplus to the worker. Indeed, this type of arbitrator would harmonise the parties' bargaining powers and then weight their investment incentives optimally.
| Item Type: | Working or Discussion Paper (Working Paper) | ||||
|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HD Industries. Land use. Labor | ||||
| Divisions: | Faculty of Social Sciences > Economics | ||||
| Library of Congress Subject Headings (LCSH): | Industrial relations, Arbitration, Industrial -- Mathematical models, Surplus (Economics), Productivity bargaining | ||||
| Series Name: | Warwick economics research papers series (WERPS) | ||||
| Publisher: | University of Warwick. Department of Economics | ||||
| Place of Publication: | Coventry | ||||
| ISSN: | 0083-7350 | ||||
| Official Date: | 13 August 2018 | ||||
| Dates: |
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| Date of first compliant deposit: | 12 March 2018 | ||||
| Number: | 1173 | ||||
| Number of Pages: | 21 | ||||
| Institution: | University of Warwick | ||||
| Status: | Not Peer Reviewed | ||||
| Publication Status: | Unpublished | ||||
| Access rights to Published version: | Open Access |
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