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IMMEDIATE SETTLEMENT OR ENDURING A STRIKE: THE CHOICE OF SIGNALS

Authors

  • Zhiyong Yao

    Corresponding author
    1. School of Management, Fudan University, Shanghai, China
    • Correspondence: Zhiyong Yao, School of Management, Fudan University, 670 Guoshun Road, Shanghai 200433, China.Tel: 862125011066; Fax: 862165642411; Email: yzy@fudan.edu.cn. The comments and suggestions by two anonymous referees are gratefully acknowledged. Conversations with Chun Chang and Ning Sun were very helpful, and I also thank Hao Wang and Kairen Zhang for their assistances. This research is supported by the China National Natural Science Foundation (71273063), the China National Social Science Foundation (11&ZD142), the China Ministry of Education Humanities and Social Sciences Program (12YJC790236), and the Fudan Financial Research Center (2012FDFRCGD16). I also thank the Scientific Research Foundation for the Returned Overseas Chinese Scholars, and the PhD Program Foundation of the Ministry of Education of China. However, all errors are mine.

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ABSTRACT

Some labour contract negotiations involve strikes while most conclude with immediate settlement. This article offers a model of union-firm negotiation with private information to show that either strikes or immediate settlement will take place in the equilibrium. Different from most signalling literature where the signals are exogenously given, this article endogenizes the choice of signals. We compare two signals, the employment level and the strategic delay. We show that the low-revenue firm will choose the signal which gives it higher payoff while separating itself from the high-revenue firm.

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