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Contributions to Economic Analysis
This paper studies wage bargaining in a simple economy in which both employed and unemployed workers search for better jobs. The axiomatic Nash bargaining solution and standard strategic bargaining solutions are inapplicable because the set of feasible payoffs is nonconvex. I instead develop a strategic model of wage bargaining between a single worker and firm that is applicable to such an environment. I show that if workers and firms are homogeneous, there are market equilibria with adoi:10.1016/s0573-8555(05)75002-1 fatcat:qc4zuu7ryzcenk2j3k4qbpifse