This paper presents a model of final-offer arbitration that distinguishes
between the union rank and file and their negotiator. If the union negotiator
has better information than the rank and file with regard to the bargaining
enviroment and the negotiated wage depends not only on this enviroment but also
the effort exerted by the negotiator, then the rank and file may not be able to
tell whether a poor wage outcome resulted from a poor bargaining enviroment or
because the negotiator was shirking. This is the classic principal—agent problem
with asymmetric information.
Through contract design the union rank and file could elicit the correct
behavior from the negotiator without resort to arbitration. But, as is shown in
this paper, under certain circumstances the rank and file could do better by
having the union negotiator go to arbitration some of the time. In a two state,
model it is shown that arbitration will occur only in the ‘bad’ state (where the
bargaining enviroment is unfavorable to the union). Arbitration is more likely
to serve a useful purpose in contract design the less risk averse the rank and
file, the smaller the direct costs of arbitration to the union, the more likely
the ‘good’ state of nature and the more difficult it is to induce 'truth
telling‘ in the absence of arbitration.

This paper develops a model of job search where some information of value
is revealed only after a job starts and where job prospects need not be
identical. Using results from the theory of multi—armed bandits, it is shown
that the optimal sampling strategy consists of an ordering of the job
prospects to be searched. Those jobs with greater 'residual' uncertainty
remaining when the job begins, will, ceteris paribus, be placed higher in the
sampling order and be associated with a lower reservation wage. Thus, if jobs
differed only with respect to this match uncertainty, reservation wages would
increase over an unemployment spell. In general, when search costs and wage
distributions also differ across jobs, the behavior of reservation wages over
an unemployment spell need not be monotonic.

This paper develops a model of occupational matching where, within an
occupation, information at one job may be useful for predicting the match at
other jobs. Recent developments in the theory of superprocesses are used to
derive the optimal sampling policy which predicts that those currently working
their second job within an occupation are less likely to separate from this
job then those working their first job. Also, this difference should increase
with tenure in the previous job since, for those with long tenures, it is more
likely that occupational sorting has taken place. These predictions are tested
using weekly tenure data from the National Longitudinal Survey: Youth Cohort.
Controlling for unobserved heterogeniety and employing semi-parametric
estimation techniques, it is found that one’s previous job tenure
significantly lowers the likelihood of leaving the current job only if both
jobs are of the same occupation. However, overall, occupational switchers are
more likely to leave the current job only if the tenure in the previous job is
greater than one year. Similar results are found for job quitters when the
data is analyzed using a competing risks framework.