The Dynamic Wage Barganing Problem

This paper considers dynamic equilibria in wage bargaining unifying for the first time the models of Coles and Wright (1998) and Pissarides and producing in contrast to the Coles and Wright model, a non-deficient equilibrium. In sharp contrast to the Pissarides model we analyse a fully dynamic model with non-linear cost functions and risk-averse agents, to provide overall, saddle-path stability and unique wage and employment outcome which is devoid of limit cycles.Wage determination, job matching, unemployment, labour markets, bargaining.