Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2015-08-18
Number: 15-100/VI
Author-Name: Björn Brügemann
Author-Workplace-Name: VU University Amsterdam
Author-Name: Pieter Gautier
Author-Workplace-Name: VU University Amsterdam
Author-Name: Guido Menzio
Author-Workplace-Name: University of Pennsylvania, United States
Title: Intra Firm Bargaining and Shapley Values
Abstract: The paper revisits the problem of wage bargaining between  a firm and multiple workers. We show that the Subgame Perfect Equilibrium of the extensive-form game proposed by Stole and Zwiebel (1996a) does not imply a profile of wages and profits that coincides with the Shapley values as claimed in their classic paper. We propose an alternative extensive-form bargaining game, the Rolodex Game, that follows a simple and realistic protocol and that, under some mild restrictions, admits a unique Subgame Perfect Equilibrium generating a profile of wages and profits that are equal to the Shapley values. The vast applied literature that refers to the Stole and Zwiebel  game to give a game-theoretic foundation to the use of the Shapley values as the outcome of the bargain between a  firm and multiple workers should instead refer to the Rolodex game.
Classification-JEL: D21, J30
Keywords: Intra firm bargaining, Shapley value
File-Url: https://papers.tinbergen.nl/15100.pdf
File-Format: application/pdf
File-Size: 298740 bytes
Handle: RePEc:tin:wpaper:20150100