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Figure 1 – uploaded by Alec Smith
Figure 1 important reason for downward wage rigidity in times of recession is the perception that wage cuts would be perceived by employees as unkind measures to which the reaction would be less conscientious on-the-job effort.t The economic consequence may be nationwide involuntary unemployment, as firms prefer layoffs to wage cuts if the fired personnel cannot strike back. Firing personnel can have negative-reciprocity repercussions too though, as fired personnel have been known to engage in sabotage such as messing up computer systems before they leave their office.> of hold-up for reasons other than negative reci- procity. The purpose of our paper is not to comment on how to best model renegotiation, however. Nor do we want any bargaining con- found as we attempt to isolate the effects of negative reciprocity on hold-up as residual rights of control shift. We therefore, as seen in the Low-game and the High-game, assume a bar- gaining institution the outcome of which under selfish preferences is invariant to the assignment of residual rights of control.
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