We present a non-cooperative union-firm wage bargaining model in which the union must
choose between strike and holdout if a proposed wage contract is rejected. The innovative
element that our model brings to the existing literature on wage bargaining concerns the
parties’ preferences which are not expressed by constant discount rates, but by sequences
of discount factors varying in time. First, we determine subgame perfect equilibria if the
strike decision of the union is exogenous. We analyze the case when the union is committed
to strike in each disagreement period, the case when the union is committed to strike only
when its own offer is rejected, and the case of the never strike exogenous decision. A
comparison of the results is provided, among the cases of the exogenous strike decisions.
Next, we consider the general model with no assumption on the commitment to strike. We
find subgame perfect equilibria in which the strategies supporting the equilibria in the
exogenous cases are combined with the minimum-wage strategies, provided that the firm is
not less patient than the union. If the firm is more impatient than the union, then the
firm is better off by playing the no-concession strategy. We find a subgame perfect
equilibrium for this case.