Static and Dynamic Analysis of Iran’s Labor Market without Government Intervention Using Game Theory

Younes Brumand¹

1) urmia university

IOI Code : XYBC-ZKACE
Publication : 2nd International Conference On Modern Researchs in Management, Economics & Accounting(2meaconf.com)
Abstract :
    This paper is aimed at analyzing labor market without government intervention, and the employer-employee relationship is analyzed solely through game theory. Both players (employer and employee) have the two strategies of tendency to maintain the current situation and tendency to change the current situation. The game between the two is analyzed within both the static and the dynamic circumstances, and it is assumed that the information is complete. The static game is the prisoner’s dilemma whose Nash equilibrium is in a low productivity level, and therefore it is not Pareto optimal. The dynamic game is also solved through Nash sub-game perfect equilibrium (SPE), which is not Pareto optimal either. Since this game is constantly repetitive, the players can achieve Pareto optimality (efficiency) through cooperation and adopting the tit-for-tat strategy.

Keywords : labor market static and dynamic games with complete information prisoner’s dilemma nash equilibrium spe equilibrium