Game Theory in Collective Bargaining
I’m an ILR student, and in core classes and all across Ives, there are discussions regarding collective bargaining and union strikes in today’s world. Despite the subject matter of Industrial and Labor Relations appearing seemingly distant from mathematical models and analyses, collective bargaining in today’s world is a growing issue with applications for game theory. As I am writing this, the article I pulled from was published just 10 minutes ago; the struggle for balance between labor and management is a growing topic and concern for corporations across the United States and worldwide. Whether it is Major League Baseball or our Collegetown Starbucks, managing human capital can definitely be solved utilizing game theory, as both sides are striving to reach the “optimal” solution, and human emotions and decision-making are often not as efficient as logical, modeled-out resolutions.
In game theory, Nash equilibria represent the “optimal” solutions. As an application to collective bargaining, the Nash equilibrium would represent the best possible solution for both parties, meaning neither party would have any inclination to switch strategies, as they already are in the most beneficial position for their respective interests. In the case of this article, Amtrak is shutting down long-distance travel starting Thursday, September 15, out of preparation for a freight rail worker strike and short staff. These disruptions will have a massive ripple effect, as rail transportation in and across large metropolitan areas will cease for this weekend, and all travel will disperse elsewhere or not happen at all. As a result, I would contend that this solution is not optimal, and definitely not a Nash equilibrium. For example, rail workers suffer, as all workers will not be granted even the opportunity to work, regardless of if they were choosing to strike or not. Amtrak will lose thousands of passengers and revenue over this weekend and lose credibility as a leading transportation system in the United States. Passengers will forego their tickets and plans to travel for work, family, and leisure, sending a ripple effect across major Amtrak cities, such as Chicago, D.C., Philadelphia, and New York. Nonetheless, utilizing game theory to examine the myriad of options available from wages to benefits, working hours, locations, promotions, staff treatment, and more could maximize the outcome for all parties involved. Even if there is no “optimal” solution, game theory can rule out suboptimal solutions as well, allowing for the best possible outcome.
https://www.washingtonpost.com/transportation/2022/09/14/amtrak-passenger-rail-strike/