Year of Publication

Some workers bargain with prospective employers before accepting a job. Others could
bargain, but find it undesirable, because their right to bargain has induced a sufficiently
favorable offer, which they accept. Yet others perceive that they cannot bargain over
pay; they regard the posted wage as a take-it-or-leave-it opportunity. Theories of wage
formation point to substantial differences in labor-market equilibrium between bargained
and posted wages. The fraction of workers hired away from existing jobs is another key
determinant of equilibrium, because a worker with an existing job has a better outside
option in bargaining than does an unemployed worker. Our survey measures the
incidences of wage posting, bargaining, and on-the-job search. We find that about a
third of workers had precise information about pay when they first met with their
employers, a sign of wage posting. We find that another third bargained over pay before
accepting their current jobs. And about 40 percent of workers could have remained on
their earlier jobs at the time they accepted their current jobs.

Date Published
Publication Language
Citation Key
Hall, R., & Krueger, A. (2008). Wage Formation between Newly Hired Workers and Employers: Survey Evidence. Retrieved from (Original work published 10/2008AD)
Working Papers

Year of Publication

Most contracts that individuals enter into are not written from scratch but depend upon forms and
terms that have been successful in the past. In this paper we study the structure of the form construction
contracts published by the American Institute of Architects (AIA). We show that these contracts are an
e¢ cient solution to the problem of procuring large, complex projects when unforeseen contingencies are
inevitable. This is achieved by carefully structuring the ex post bargaining game between the Principal
and the Agent. The optimal mechanism corresponding to the AIA construction form is consistent with
decisions of the courts in several prominent, but controversial, cases, and hence provides an economic
foundation for a number of the common-law excuses from performance. Finally, the case of form contracts
for construction is an example of how markets, as opposed to private negotiation, can be used to determine
e¢ cient contract terms.

Date Published
Publication Language
Citation Key
Chakravarty, S., & MacLeod, B. (2004). On the Efficiency of Standard Contracts the Case of Construction. Retrieved from (Original work published 09/2004AD)
Working Papers

Year of Publication

This note reports the results of an experiment which was designed
to test Rubinstein's(1982) theory of bargaining. We were particularly
interested in how it would compare with the hypothesis that bargainers
tend to split a pie 50-50. We duplicated Binmore, Shaked and
Sutton's(1986) result that the equal split hypothesis is rejected in a two
round game with alternating offers. However, we show that in similar
games with more than two rounds Rubinstein's theory is also rejected.
Thus their conclusion, that subjects behave as "gamesmen" (i.e. in a
manner consistent with the predictions of game theory), was premature.
In experiments with varying numbers of rounds, our first players
consistently offered their opponents shares equal to the value of the
second round pie. In a two round game this behaviour by definition
yields offers consistent with Rubinstein's theory. In games with more
rounds it does not.
In each game, the majority of first players chose to make the same
offer. In fact, the regularity of their behaviour is perhaps our
strongest result. While neither Rubinstein's theory nor the equal split
model explain our findings, the regularity of our subjects' behaviour
suggests that there is hope of finding a model of bargaining which

Date Published
Publication Language
Citation Key
The American Economic Review, Vol. 78, No. 4, Sept., 1988
Neelin, J., Sonnenschein, H., & Spiegel, M. (1986). An Experimental Test of Rubinstein's Theory of Bargaining. Retrieved from (Original work published 05/1986AD)
Working Papers

Year of Publication

This paper estimates the role of insider power in wage determination in a
unionized industry, examining the direction and magnitude of biases which may
arise through failure to control for variation in both hours of work and the
composition of the labor force and through failure to control for the endogeneity
of measured profits. Furthermore, by examining the extent to which rent-sharing
is related to exogenous demand shocks rather than to potentially endogenous
productivity, we provide a test of the bargaining and ‘pure’ efficiency wage
models, finding that the majority of the insider weighting can be explained by
the bargaining model. Our data set covers earnings and profitability in the New
South Wales coal industry from 1952 to 1987. We estimate a partial adjustment
model and test for co-integration of the time series in order to establish
whether or not a long-run stable equilibrium exists.

Date Published
Publication Language
Citation Key
Review of Economics and Statistics, Vol. 76, No. 2, May 1994
Mumford, K., & Dowrick, S. (1990). Wage Bargaining with Endogenous Profits, Overtime Working and Heterogeneous Labor. Retrieved from (Original work published 11/1990AD)
Working Papers