LABOR NEGOTIATIONS AND GAME THEORY: THE CASE OF ASYMMETRIC BARGAINING POWER

Abstract

Recent labor negotiations suggest that game-theory models can be used to analyze a wide range of labor relations situations. This article presents examples of how the Prisoner’s Dilemma game can be extended to highlight the incentives present in many contract negotiations, including sports. Examples are the successful asymmetric bargaining power applied to the Major League Baseball Players Association contract talks in 2002, and the problem-filled National Hockey League Players Association negotiations of 2004, which are likened to a game of Chicken, and in which it was unclear whether one side held an advantage over the other.