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Strategic Disclosure of Firm-Specific Skills in Wage Bargaining

Mumcu, Ayşe (1999): Strategic Disclosure of Firm-Specific Skills in Wage Bargaining.

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We study the bargaining relationship between a firm and its incumbent worker who possesses firm-specific human capital. We show that the worker's ability to disclose his skills strategically increases his bargaining power. The game may have inefficient equilibria where delays occur in real time. With the addition of outside options for both the firm and the worker, delays are shortened whenever outside options are credible threats. Our model also predicts that wages are procyclical, and there can be a variation in wages for a given job level.

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