Unions and Cooperative Behavior: The Effect of Discounting.

Using union contract and industry wage survey data, this article examines the effect of discounting on cooperative bargaining behavior by unions and firms. Game theory predicts that higher discount rates raise the temptation to defect from cooperation. Measures of cooperative behavior include the presence of merit pay, incentive pay, wage-employment guarantees, or labor-management study committees. Discount rates are proxied by the relevant industry's failure rate. Failure rates generally had negative effects on cooperation. Industy Wage Survey results showed larger effects for union than nonunion establishments, providing support for the union bargaining framework. Copyright 1993 by University of Chicago Press.