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Who Should Draft a Union Contract in Game Theory?

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The UAW labor contract with General Dynamics expired in October 2001. In the months preceding the expiration date, bargaining teams for the UAW and General Dynamics met to negotiate a new contract. All contracts must be ratified by the union members. Some of the many issues on the table included job security, health benefits, and wages. If you were an executive in charge of human resource issues at General Dynamics, would you be better off

(a) letting the union bear the expense of crafting a document summarizing its desired compensation, or
(b) making the union a take-it-or-leave-it offer? Explain.

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Solution Summary

Answers the question of whether, as a manager, you should make the union draft the contract or draft it yourself in 312 words with much reference to the hawk-dove game theory model.

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This problem is very similar to the hawk-dove game theory model. The game models the behaviour of two predators who find a prey. They can either both be aggressive (hawks), both leave (doves) or one be aggressive and one be a dove (hawk-dove). The jist of the game is that there are really high costs to both being aggressive because they will both be hurt in the physical confrontation. If they both leave, no one gets anything. ...

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