I analyze the strategic use of debt financing to improve a firm's bargaining position with an important supplier—organized labor. Because maintaining high levels of corporate liquidity can encourage ...workers to raise their wage demands, a firm with external finance constraints has an incentive to use the cash flow demands of debt service to improve its bargaining position with workers. Using both firm-level collective bargaining coverage and state changes in labor laws to identify changes in union bargaining power, I show that strategic incentives from union bargaining appear to have a substantial impact on corporate financing decisions.
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•I examine how other-regarding preferences aggregate in a free-form bargaining experiment.•I find that bargainers retain equal payoffs when they transfer payoffs to third subjects.•The same subjects ...vary the transfers to third subjects considerably depending on their bargaining partner.•The formal analysis can link the results to the individual preferences of the bargainers.•Assuming pairwise inequality aversion explains 80% of the variance of the bargaining agreements.
Other-regarding preferences are powerful drivers of human behavior, leading individuals to forgo their own economic gains to share with others. However, when subjects with different levels of other-regarding concern bargain about how to distribute payoffs, it is unclear whether joint bargaining decisions reflect their individual preferences. In this free-form bargaining experiment, I examine how other-regarding preferences of two subjects interact and influence negotiated distribution decisions when they allocate payoffs between themselves and a powerless third subject. The data reveals that fairness between the bargainers is more important than fairness towards the third subject; bargainers only allocate payoff shares to third subjects if the other bargainer is willing to allocate the same amount, even if their other-regarding preferences differ strongly from each other when revealed individually. Through the formal analysis, I can link the results to the other-regarding preferences elicited individually and, thereby, provide new insights into the interaction of other-regarding preferences in joint decision-making environments.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
We study matching and coalition formation environments allowing complementarities and peer effects. Agents have preferences over coalitions, and these preferences vary with an underlying, and ...commonly known, state of nature. Assuming that there is substantial variability of preferences across states of nature, we show that there exists a core stable coalition structure in every state if and only if agents' preferences are pairwise-aligned in every state. This implies that there is a stable coalition structure if agents' preferences are generated by Nash bargaining over coalitional outputs. We further show that all stability-inducing rules for sharing outputs can be represented by a profile of agents' bargaining functions and that agents match assortatively with respect to these bargaining functions. This framework allows us to show how complementarities and peer effects overturn well known comparative statics of many-to-one matching.
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▶ An experiment shows the existence of bargaining costs. ▶ Bargaining costs are sub-additive and subjects prefer to pool many bargains into one. ▶ Face to face bargaining is more costly than ...anonymous bargaining. ▶ The results suggest that mechanisms differ in their costs of use.
A mechanism with low direct cost of use may be preferred to alternatives implementing more efficient allocations. We show this experimentally by giving pairs of subjects the option to agree on a single average price for a sequence of trades—in effect pooling several small bargains into a larger one. We make pooling costly by tying it to some inefficient trades, but subjects nevertheless reveal strong tendencies to pool, particularly when more bargains remain to be struck and when bargaining is face to face. The results suggest that implementation costs could play a significant role in the use of many common trading practices.
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Abstract
We study patterns of behavior in bilateral bargaining situations using a rich new data set describing back-and-forth sequential bargaining occurring in over 25 million listings from eBay’s ...Best Offer platform. We compare observed behavior to predictions from the large theoretical bargaining literature. One-third of bargaining interactions end in immediate agreement, as predicted by complete-information models. The majority of sequences play out differently, ending in disagreement or delayed agreement, which have been rationalized by incomplete information models. We find that stronger bargaining power and better outside options improve agents’ outcomes. Robust empirical findings that existing models cannot rationalize include reciprocal (and gradual) concession behavior and delayed disagreement. Another robust pattern at odds with existing theory is that players exhibit a preference for making and accepting offers that split the difference between the two most recent offers. These observations suggest that behavioral norms, which are neither incorporated nor explained by existing theories, play an important role in the success of bargaining outcomes.
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IZUM, KILJ, NUK, PILJ, SAZU, UL, UM, UPUK
Rules help guide our behavior—particularly in complex social contexts. But rules sometimes give us the “wrong” answer. How do we know when it is okay to break the rules? In this paper, we argue that ...we sometimes use contractualist (agreement-based) mechanisms to determine when a rule can be broken. Our model draws on a theory of social interactions – “virtual bargaining” – that assumes that actors engage in a simulated bargaining process when navigating the social world. We present experimental data which suggests that rule-breaking decisions are sometimes driven by virtual bargaining and show that these data cannot be explained by more traditional rule-based or outcome-based approaches.
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While there is a strong overlap between membership in employers’ associations and collective bargaining coverage, the overlap is far from being perfect. Using unique firm-level data from Germany, ...this study estimates the determinants of the membership in employers’ associations and the coverage by industry-level or firm-level agreements. The analysis particularly focuses on the various constellations of membership and collective bargaining status. The results show that firm-level worker representation, foreign ownership, work organization, firm size, age and East–West differences are important determinants. Altogether, the analysis demonstrates that a more differentiated picture of industrial relations can be obtained by considering both membership in employers’ associations and collective bargaining coverage.
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We study sequential bargaining between a proposer and a veto player. Both have single‐peaked preferences, but the proposer is uncertain about the veto player's ideal point. The proposer cannot commit ...to future proposals. When players are patient, there can be equilibria with Coasian dynamics: the veto player's private information can largely nullify proposer's bargaining power. Our main result, however, is that under some conditions there also are equilibria in which the proposer obtains the high payoff that he would with commitment power. The driving force is that the veto player's single‐peaked preferences give the proposer an option to “leapfrog,” that is, to secure agreement from only low‐surplus types early on to credibly extract surplus from high types later. Methodologically, we exploit the connection between sequential bargaining and static mechanism design.
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30.
Synthetic controls with staggered adoption Ben‐Michael, Eli; Feller, Avi; Rothstein, Jesse
Journal of the Royal Statistical Society. Series B, Statistical methodology,
April 2022, 2022-04-01, 20220401, Volume:
84, Issue:
2
Journal Article
Peer reviewed
Open access
Staggered adoption of policies by different units at different times creates promising opportunities for observational causal inference. Estimation remains challenging, however, and common regression ...methods can give misleading results. A promising alternative is the synthetic control method (SCM), which finds a weighted average of control units that closely balances the treated unit’s pre‐treatment outcomes. In this paper, we generalize SCM, originally designed to study a single treated unit, to the staggered adoption setting. We first bound the error for the average effect and show that it depends on both the imbalance for each treated unit separately and the imbalance for the average of the treated units. We then propose ‘partially pooled’ SCM weights to minimize a weighted combination of these measures; approaches that focus only on balancing one of the two components can lead to bias. We extend this approach to incorporate unit‐level intercept shifts and auxiliary covariates. We assess the performance of the proposed method via extensive simulations and apply our results to the question of whether teacher collective bargaining leads to higher school spending, finding minimal impacts. We implement the proposed method in the augsynth R package.
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