Consider an economy subject to two kinds of shocks: (a) an observable shock to the relative demand for final goods which causes dispersion in relative prices, and (b) shocks, unobservable by workers, to the technology for transforming intermediate goods into final goods. A worker in a particular...

Consider an economy subject to two kinds of shocks: (a) an observable shock to the relative demand for final goods which causes dispersion in relative prices, and (b) shocks, unobservable by workers, to the technology for transforming intermediate goods into final goods. A worker in a particular...

This paper presents a wage bargaining model in which the employer and employee are each uncertain about the other's reservation wage. Under specified circumstances, the model's equilibrium is shown to involve unilateral wage setting and inefficient labor turnover. In addition, aggregate demand...

This paper presents a wage bargaining model in which the employer and employee are each uncertain about the other's reservation wage. Under specified circumstances, the model's equilibrium is shown to involve unilateral wage setting and inefficient labor turnover. In addition, aggregate demand...