A Theory of Holdouts in Wage Bargaining

Abstract

Holdouts (the continuation of negotiations beyond the contract expiry date) are the most common form of disputes in labor contract negotiations. The authors model holdouts as a delaying tactic employed by unions to obtain information about other bargaining outcomes in their industry. Novel implications of their model include a positive association between holdout duration and the number of bargaining pairs negotiating contracts simultaneously; bunching of holdout durations within these 'negotiating groups'; and fewer strikes among holdouts which end later in groups. Using a large panel of contract negotiations in Canadian manufacturing, the authors find considerable support for these predictions. Copyright 1998 by American Economic Association.

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