Holdouts, backdating and wage negotiations

The Haller and Holden (JET, 1990) wage bargaining model is extended to incorporate holdouts with and without work-to-rule, inefficient holdouts and backdating of new contracts. The union's most effective action inflicts the highest costs upon the firm among the credible actions. Necessary and sufficient conditions for equilibria with lengthy holdouts are derived. Backdating does not affect the bargaining positions of the parties. The settlement wage negatively depends upon the length of the holdout and this dependence does not disappear as the time between bargaining rounds vanishes. This result has implications for empirical work. Moreover, this negative effect is small and confirms empirical evidence for the Netherlands.