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Organizational Design and Technology Choice under Intrafirm Bargaining: Reply

Organizational Design and Technology Choice under Intrafirm Bargaining: Reply Organizational Design and Technology Choice under Intrafirm Bargaining: Reply By LARS A. STOLE Catherine C. de Fontenay and Joshua S. Gans (2003) provide an interesting and insightful extension to our theory of intrafirm bargaining between workers and a firm, by introducing a pool of ready-to-employ workers that a firm can freely draw upon at any time. In our prior work on intrafirm bargaining (Stole and Zwiebel, 1996a, b), we developed a general multiperson bargaining framework in order to analyze how workers’ rents depend upon their marginal products and their inframarginal products. In this setting, the firm first chooses the number of employees to hire, and then negotiates wages with each of them in a series of bilateral meetings. Because the firm cannot hire additional workers once negotiations have begun, workers are temporarily irreplaceable and possess hold-up power in these negotiations. In equilibrium, employee wages are uniquely determined by the requirement that neither the firm nor any individual worker can benefit from bilateral renegotiation, taking into account the parties’ respective bargaining power and the disagreement point. We assume that following a breakdown in any bilateral meeting, the worker permanently separates from the firm and the firm renegotiates wages with http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

Organizational Design and Technology Choice under Intrafirm Bargaining: Reply

Stole, Lars A; Zwiebel, Jeffrey
American Economic Review , Volume 93 (1) – Mar 1, 2003
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Publisher
American Economic Association
Copyright
Copyright © 2003 by the American Economic Association
Subject
Shorter Papers
ISSN
0002-8282
DOI
10.1257/000282803321455421
Publisher site
See Article on Publisher Site

Abstract

Organizational Design and Technology Choice under Intrafirm Bargaining: Reply By LARS A. STOLE Catherine C. de Fontenay and Joshua S. Gans (2003) provide an interesting and insightful extension to our theory of intrafirm bargaining between workers and a firm, by introducing a pool of ready-to-employ workers that a firm can freely draw upon at any time. In our prior work on intrafirm bargaining (Stole and Zwiebel, 1996a, b), we developed a general multiperson bargaining framework in order to analyze how workers’ rents depend upon their marginal products and their inframarginal products. In this setting, the firm first chooses the number of employees to hire, and then negotiates wages with each of them in a series of bilateral meetings. Because the firm cannot hire additional workers once negotiations have begun, workers are temporarily irreplaceable and possess hold-up power in these negotiations. In equilibrium, employee wages are uniquely determined by the requirement that neither the firm nor any individual worker can benefit from bilateral renegotiation, taking into account the parties’ respective bargaining power and the disagreement point. We assume that following a breakdown in any bilateral meeting, the worker permanently separates from the firm and the firm renegotiates wages with

Journal

American Economic Review – American Economic Association

Published: Mar 1, 2003

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