This paper proposes a theoretical analysis of final-offer arbitration in which disputants may be represented by lawyers who can be paid by flat, contingent, or conditional fees. We derive the equilibrium lawyers' efforts to defend their clients and the equilibrium parties' proposals made to the...

Empirical and experimental research suggests that minimum wages cause spillovers to wages higher up in the wage distribution, i.e., they may even raise wages that were already above the new minimum wage. In this paper, we analyze how these findings can be explained by theoretical wage bargaining...

In negotiations purely over interests, someone who initiates a concession but fails to reach agreement has lost nothing, but with honour at stake, initiating a concession reveals one as willing to compromise over honour. A mediator can help by suggesting a compromise that both parties would not...

The consequences of strike ballots are analysed in a non-cooperative model of negotiations between a union and a firm over wage increases. The firm possesses private information about its revenues. The union can only stop the firm from rejecting wage demands if a refusal is costly, due to a...

We study the determinants of the skill premium in a matching model where wages are set in bilateral meetings between workers and firms. As a novelty, disagreeing parties do not have to separate immediately, but they may opt to wait for competing agents to arrive. This waiting option is...

Labor law limits the freedom of individual firms and agents to deviate from the clauses prescribed by collective wage agreements. We show that employers´ associations and unions may exploit this legal framework to stabilize product market cartels. This new view on the institution of collective...

Comparative law and finance quantifies differences in the laws governing the business enterprise in various countries. The resulting data can be used to test which legal institutions (if any) matter for financial development. Until recently only cross-sectional data were available. We report the...

Witnesses often gain by slanting testimony. Courts try to elicit the truth with perjury rules. Perjury is not truth-revealing; truth revelation is, however, possible. With a truth-revealing mechanism the judge will get little testimony because the defendant will not present witnesses with...

There is extensive literature on whether courts or legislators produce efficient rules, but which of them produces rules efficiently? The law is subject touncertainty ex ante; uncertainty makes the outcomes of trials difficult to predict and deters parties from settling disputes out of court. In...