A Game Theoretic Model of Iranian Labor Market

Abstract

In this paper, we analyze the interactions among workers, employers, and the government in the Iranian labor market using game theory. For this purpose, different games among the factors affecting the labor market are analyzed in both static and dynamic situations. In each case, intervention and non-intervention of the government are also examined. Thus, four different types of games are studied, including a static game between worker and employer, without government intervention; a static game among workers, employers, and the government; a dynamic game between worker and employer, without government intervention; and a dynamic game among workers, employers, and the government. In the first three games, Nash equilibrium implies low productivity of worker, low employer’s profits, and high unemployment rate in which players want to maintain the status quo. However, in the dynamic game among workers, employers, and the government, the sub-game perfect equilibrium of the game can provide some conditions in which the labor market gets away from the low productivity situation