BARGAINING OVER A MENU OF WAGE CONTRACTS

We investigate an infinite horizon bargaining problem in which a firm and a worker bargain over two dimensions, quality and wage. The worker has private information about his type. Only the uninformed firm make s an offer and it can offer a menu of quality-wage contracts instead o f single one. We show that for all discount factors, the unique sequen tial equilibrium outcome is separating without delay; the firm separat es the types of worker with a menu of contracts in the first period. O ur result shows that in multi-dimensional bargaining, the ''Coase Conj ecture'' holds in the sense that the game ends in the first period. Bu t it fails in the sense that the uninformed party can preserve the ent ire bargaining power.