DMP model, a shock that raises the value of what firms sell – other things the same – increases their incentive to hire workers by raising profits per worker. The problem, according to Shimer is that this mechanism sets into motion a negative feedback loop which in the end largely cancels firms' incentive to expand employment. In particular, as employment expands, labor market conditions in general begin to improve for workers and this puts them in a stronger position as they negotiate wages with employers. But, the resulting rise in the wage then cuts into the profits earned by firms and thus limits their incentive to hire workers. The problem has come to be known as the 'Shimer puzzle'. That puzzle can loosely be paraphrased as follows: "what modification to the DMP framework is needed to put it in line with the empirical evidence that employment rises sharply during a business cycle expansion?" Although enormous efforts have been made, the puzzle has largely resisted a solution, until the Milgrom paper. Milgrom (with Hall), argued that the bargaining framework used in the standard DMP model does not correspond well to the way wages are actually negotiated. They argue that, by the time workers and firms sit down to bargain, they know that there is a substantial amount to be gained if they make a deal. The firm's human resources department has most likely already checked out the worker to verify that they are suitable. Most likely, the worker has done a similar preliminary check to verify that they could make a useful contribution to the firm. A consequence of this is that if, during the negotiations, the firm and worker disagree, they are very unlikely to simply part ways. Instead, it is more likely that they continue negotiating until they do reach agreement. It follows that as they make proposals and counterproposals, bargaining worker/firm pairs are mindful of the various costs associated with delay and the making of counterproposals. They are not so concerned about the consequences of a total breakdown in negotiations and of having to go back to the general labor market to search for another worker or job. Milgrom stresses that with this shift in perspective on bargaining, the impact of improved general conditions on the wage bargain is weakened as long as costs of delay and renegotiation are not very sensitive to broader economic conditions. In particular,