Bargainers learning function I

To predict the actual time path of wage demands it is necessary to specify in the mathematical representation of the reaction functions the exact of the bargainers uses in modifying their position. This decision rule is the bargainer’s learning function. The learning function of each bargainer states how its wage demand will change given a particular change in the opponent’s demand. The learning function captures the crucial process of strategic interaction in the bargaining.

Can we develop a mathematical equation for this learning phase? Maybe, however it is not easy to develop one due to the nature of the back and forth between the bargainers. Principally because the analysis becomes too complicated. The basic idea that underlies the learning function can be easily explained however to capture the dynamic interaction between TWU Local 100 and MTA bargainers one approach can be based on the learning function on what is called aspiration level theory. According to this theory people have goals or aspirations that they seek to obtain. Studies in psychology have shown that a person’s aspirations behave in a predictable way rising with greater than expected success and failing with less than expected success. In calculating the most favorable wage demands both TWU Local 100 and MTA negotiators implicitly estimate what the other side’s demand will be and how fast the opponent will concede during the negotiations. Lets assume for example that TWU Local 100 negotiator based on his or her subjective estimate of the MTA negotiator’s initial offer will be zero (0) an hour and that this offer will then be increased to 15¢ in the second round. What happens to TWU Local 100 wage demand if the MTA offers only 15¢ an hour?

The failure of the MTA wage offer to meet TWU Local 100 negotiators expectations should cause a reevaluation of TWU Local 100 demand. TWU Local 100 negotiator might conclude that he or she had overestimated the MTA vulnerability to strike costs or underestimated that the MTA bargainer had attached to the stated objective of holding down labor costs. If TWU Local 100 becomes convinced that the MTA position is not a bluff but is in fact the MTA firm actual bargaining position then the aspirations level theory predicts that the TWU Local 100 negotiator would respond by lowering the TWU Local 100 demand from its initial position. Had the MTA initial wage offer been more than TWU Local 100 anticipated the opposite result would be predicted TWU Local 100 bargainer would raise his or her expectations of what was attainable and would concede less than originally planned.