1 / 16

Bargaining, Fairness and the Labor Allocation Problem

Bargaining, Fairness and the Labor Allocation Problem. Paul Pecorino Mark Van Boening University of Alabama University of Mississippi. Detailing: Bilateral Bargaining. Asymmetric information “thin markets” Detailer makes offer Player B

chase-torres
Télécharger la présentation

Bargaining, Fairness and the Labor Allocation Problem

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Bargaining, Fairness andthe Labor Allocation Problem Paul Pecorino Mark Van Boening University of Alabama University of Mississippi

  2. Detailing: Bilateral Bargaining • Asymmetric information “thin markets” • Detailer makes offer Player B • Sailor knows his/her type Player A High, Low productivity Detailer: what offer to make to a given Sailor? Separating equilibrium Pooling equilibrium

  3. Detailing: Bilateral Bargaining • Problem: what if offer is rejected? Dispute = inefficient allocation • Both sides incur a cost if there is a dispute Sailor: 2nd choice, moving costs, fewer pts, etc. Detailer: performance rating, bonus, etc.

  4. Detailing: Bilateral Bargaining Dispute costs: equal or unequal? • How does the distribution of costs affect • Dispute rates • Perception as to what is a “fair” offer • Higher dispute rates = unfilled billets • “Unfair” = dissatisfaction, low retention

  5. Our Previous Research 1 Dispute Resolution Mechanisms • Theory Bebchuck (’84) asymm. info incr. disputes • Arbitration: one way to settle disputes labor, securities industry, discrimin/harrass e.g., Conventional, Final Offer • Data: We’ve conducted experiments Journal of Labor Economics Oct. ‘01

  6. Our Previous Research 2 Signaling, cheap talk • Theory Shavell (’89) incentive to reveal decr. disputes • Player with information can send message as to her type • Message may or may not be credible • Data: Another experimental test currently under review / revision

  7. The Game • 2 Players: A (AL or AH) and B • A knows her type, B knows probability • B makes offer, A decides to accept or reject • A gets payoff, B incurs cost • If A accepts, payoff = cost = offer • If A rejects, • payoff, cost depend on A’s type • both A & B incur additional dispute cost

  8. The Experiment • 5 – 7 pairs per session • A starts w/ $0, B starts w/ ~$70 • n = 13 - 14 rounds per session • Random anonymous pairing each round • Each round, A and B “play the game” • Each session, ½ the rounds have • equal dispute costs • unequal dispute costs

  9. The Experimental Game • A round consists of the following steps: • Random event: die rolled for A p(L) = 2/3 p(H) = 1 – p(L) = 1/3 • Simultaneously, B decides on an offer 0 to 599 • Offer is then shown to A; she decides whether to accept or reject • A’s decision transmitted to B; payoffs, costs computed

  10. The Payoffs and Costs • if A accepts B’s offer: A’s payoff = B’s cost = offer • if A rejects B’s offer: AL: A’s payoff = 200 – FA B’s cost = 200 + FB AH: A’s payoff = 400 – FA B’s cost = 400 + FB FA, FB are dispute costs; FA + FB is “lost”

  11. Theoretical Predictions • Assume risk neutrality • B’s offer minimizes expected cost • B makes offer AL accepts, AH rejects • B extracts A’s cost of dispute • A’s accept/reject decision • AL accepts any offer > 200 – FA • AH accepts any offer > 400 – FA • So theory predicts • B’s offer = 200 – FA • Dispute rate = p(H) = 1/3

  12. Treatment Variable • Distribution of dispute costs • Equal (baseline): FA = 75 FB = 75 • Unequal cost T1: FA = 25 FB = 125 T2: FA = 125 FB = 25 Total dispute cost = 150 • Within-session variation (randomized order) • 4 sessions with Baseline / T1 n = 371 • 4 sessions with Baseline / T2 n = 357

  13. Baseline Data (equal cost) • Player B’s offers • Session mean – predicted value: 8/8 positive; avg. diff. approx 55 (26 to 87) • Player A’s acceptance rate • AL: avg. 84% (74% to 100%) • AH: avg. 8% (0% to 25%) • Overall dispute rate approx 42% (>33%) • Generally consistent w/ theory similar to our 2 previous studies

  14. Treatment Data FA= 25, FB= 125 • B’s offers: Treatment mean – baseline mean 3/4 positive; avg. diff. approx 30 (-10 to 62) • B offers more; theory predicts +50 • B’s avg. offer still < AH’s minimum • A’s accept. rate: Treatment % – baseline % AL: avg. -12% (-41% to 2%) AH: avg. -5% (-25% to 20%) • A rejects more offers why?

  15. Treatment Data FA= 125, FB= 25 • B’s offers: Treatment mean – baseline mean 4/4 negative; avg. diff. approx -39 (-28 to -50) • B offers less, but theory predicts -100 • A’s accept. rate: Treatment % – baseline % AL: avg. -8% (-14% to 4%) AH: avg. +3% (-10% to 12%) • AL rejects more offers why?

  16. Preliminary Conclusions • Unequal dispute cost distributions do affect both the offers and the decision to accept or reject • Appears to have biggest effect on A players, especially AL players • Will Sailors expect Command to pass along cost advantages? • More thorough data analysis is needed • Consider mechanisms that mitigate problem

More Related