UNIONS AND COOPERATIVE BEHAVIOR - THE EFFECT OF DISCOUNTING

Using union contract and industry wage survey data, this article exami nes the effect of discounting on cooperative bargaining behavior by un ions and firms. Game theory predicts that higher discount rates raise the temptation to defect from cooperation. Measures of cooperative beh avior included the presence of merit pay, incentive pay, wage-employme nt guarantees, or labor-management study committees. Discount rates we re proxied by the relevant industry's failure rate. Failure rates gene rally had negative effects on cooperation. Industry Wage Survey result s showed larger effects for union than non-union establishments, provi ding support for the union bargaining framework.