contractible. If the firm can make a take-it-or leave-it offer, the optimal contract is also state-dependent but always suboptimal … leading to agency costs due inequity aversion. If the parties bargain over the optimal contract, the optimal division of … surplus is more equitable compared to the case with a purely selfish worker. Moreover, the optimal contract with bargaining …

), proposals are balanced only if both groups have veto power (iii) negotiations often fail if the decision environment gives …

This paper contributes to the analysis of central vs. decentral (firm-level) labour market negotiations. We argue that … during negotiations on a central scale employers and employees plausibly take output market effects into account, while they … behave competitively during firm-level negotiations. Assuming that in both cases the labour market conflict is settled …