Suppose you have a negotiation situation between Management and Labor concerning

Question

Suppose you have a negotiation situation between Management and Labor concerning Labor wages. Management and Labor do well when they each do the opposite of what the other does i.e. the best situations for both are: (i) for management to bargain hard (offer low wages) and Labor to acomodate (accepts the contract offered) and (ii) for Management to acomodate (offer generous wages) and Labor to bargain hard (threatens to strike).

(a) If Management moves first what would you expect the equilibrium of this sequential game to be.

(b) If Labor moves first what would you expect the equilibrium of this sequential game to be.

(c) Is this a game with a first mover or last mover adavantage? Explain briefly

Explanation / Answer

a) Management bargain hard and labor accepts low wages

b) Labor bargains hard and management offers generous wages

c) First mover advantage.

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