Fairness, Escalation, Deference, and Spite: Strategies Used in Labor-Management Bargaining Experiments with Outside Options

25 Pages Posted: 28 Sep 2001  

McAndrew Rudisill

Middlebury College - Department of Economics

Jeffrey P. Carpenter

Middlebury College - Department of Economics; IZA Institute of Labor Economics

Date Written: May 6, 2001

Abstract

Labor-management negotiations are an example of a situation in which outside options may play an important role in determining outcomes. In particular, firms may attempt to use outside options to extract concessions from unions. In reviewing two recent cases of bargaining between management and a union, we notice that although the situations appear similar, the negotiated outcomes are dramatically different. We hypothesize that behavioral factors may play a role. To test this conjecture, we construct a bargaining experiment. Our results suggest that outside options do affect bargaining behavior. First, we find that many "fair" offers are rejected and, in general, the rate of conflict is high. Second, firms who search for outside options, but do not take them, return to bargaining and make higher offers than if they had not searched. Third, overall the act of searching by firms tends to trigger concessions from unions except when the union has previously been "hung out to dry" by a firm accepting an outside option. In this case unions react spitefully.

Keywords: experiment, bargaining, outside option, deference, spite

JEL Classification: C72, C91, J52

Suggested Citation

Rudisill, McAndrew and Carpenter, Jeffrey P., Fairness, Escalation, Deference, and Spite: Strategies Used in Labor-Management Bargaining Experiments with Outside Options (May 6, 2001). Available at SSRN: https://ssrn.com/abstract=285004 or http://dx.doi.org/10.2139/ssrn.285004

McAndrew Rudisill

Middlebury College - Department of Economics

Munroe Hall
Middlebury, VT 05753
United States

Jeffrey P. Carpenter (Contact Author)

Middlebury College - Department of Economics ( email )

Munroe Hall
Middlebury, VT 05753
United States
802-443-3241 (Phone)
802-443-2084 (Fax)

HOME PAGE: http://community.middlebury.edu/~jcarpent/index.ht

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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