Econometrica: Nov 1984, Volume 52, Issue 6

Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model

https://doi.org/0012-9682(198411)52:6<1351:IUAAPE>2.0.CO;2-4
p. 1351-1364

Avner Shaked, John Sutton

This paper presents an analysis of a 2-person noncooperative bargaining game in which one party is free, subject to certain frictions, to switch between rival partners. This permits us to capture the notion of an asymmetry between "insiders" and "outsiders" in the context of a firm bargaining with its workers, in the presence of unemployment.

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