Chapter 2 - Games Analyzing Job Loss

Summary

In Chapter 1, I presented the assumptions that underlie the game-theoretic analysis of job loss as well as the major results derived from that analysis. The goal was to acquaint the reader with the substantive logic of the games. The current chapter presents the games themselves. A second section discusses the rationale for case selection.

THE SIMPLE JOB LOSS GAME

The simplest possible interaction over workforce reductions is represented in Figure 2.1. The firm announces that job loss is required and has to decide whether to target union activists or not. Since the firm moves first, it is known as Player 1. If the firm targets activists, the union has to decide whether to strike or not. Since it moves second, the union is Player 2. The payoffs for each player are listed in order (Player 1, Player 2) at the three terminal nodes of the game.

The three assumptions presented in Chapter 1 allow us to order the payoffs for each player. There we said that the firm's most preferred outcome is to target activists and not face a strike (b₁). The reason, as the reader will recall, is that we assumed that firms wanted to exploit mass workforce reductions to target trade union representatives, thereby undermining union organization. However, firms were not prepared to pay the costs of a strike if one ensued. The firm's second most preferred outcome is simply not to target activists at all (c₁).