Self-Motivated Bargaining and Rational Strikes: A Multiparty Model and Its Implications for Industrial Strike Activity

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In this paper we present and test a theory of the bargaining process based on the self-serving motivations of the actual negotiating participants. The motivation for this research stems from two basic considerations. First, as stressed by Ashenfelter and Johnson [1], given the relatively frequent disruption of economic activity by strikes, it would be useful to know whether they are an inevitability of the present system or a function of what Hicks [9] termed faulty negotiations, and thus subject to correction. Second, we are unaware of any theory that fully incorporates the self-serving motivations of the actual bargaining parties. To realistically investigate the underlying causes of strikes, it seems reasonable that the preference functions of the actual bargaining parties must be an integral part of the analysis. That is, economists have traditionally analyzed the collective bargaining process as a bilateral monopoly confrontation. This has resulted in general theories of conflict resolution that are based on rational preferences of the bargaining constituents and are thus unconcerned with the possibility that bargaining participants may seek to achieve their own objectives. The theories of Edgeworth [6], Zeuthen [17], Pen [11], Shackle [13], and Hicks [9] exemplify this. Harsanyi [8] has since translated Zeuthen's theory into modern utility terms, but he has done so without regard to the time dimensions of labormanagement negotiations. The first contribution of a nonstatic nature was that by Cross [5] in which the players in his two-party model both learn with the passage of time and have time-discounted utility functions. Similarly, Contini [3; 4] has developed a two-party theory with time explicitly introduced in the utility function of each bargainer. While these theories are improvements over the traditional bargaining theories, they are not intended for collective bargaining specifically, and thus do not consider the self-motivation in the decisions of the parties actively involved in the negotiations.