Conflict and Contract: The Case of Strikes

Abstract

Analyses of strike behavior rarely take account of prior learning and experience of bargainers. We show that experienced bargainers have fewer strikes than others and that differences in strike activity across U.S. manufacturing industries vary inversely with the estimated cost of striking. The cost of striking is measured as an inverse function of the ease of substituting pre- and poststrike production for strike-inhibited output. The occurrence of strikes, among rational and experienced bargainers, is attributed to the cost of designing contingent contracts applicable to unlikely circumstances, relative to the expected cost of strikes in such circumstances, absent contingent contracts.