CEU Electronic Theses and Dissertations, 2007
| Author | Radnai, Miklós |
|---|---|
| Title | The fair wage-effort hypothesis in a multi-period context |
| Summary | In this work the fair wage-effort hypothesis of Akerlof and Yellen (1990) is extended into multiple periods. Two types of workers are introduced based on different fair wages, and the resulting asymmetric information problems are solved and compared for the single-period and multi-period cases. The pooling and separating equilibria are examined in both situations. It is shown that in both equilibria there is a threshold for the ratio of the two types, above and below which the firm's optimal strategy is different. The type of worker that is the main beneficiary of the asymmetric information differs under the two equilibria. In addition, it is shown that the firm's per-period profits and worker's utilities change greatly as soon as time is introduced into the model. A further extension is introduced, in which fair wages are allowed to change over time. This shows that firms can lose substantial profits if they do not consider such changes and do not act accordingly. |
| Supervisor | Baniak, Andrzej |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2007/c05ram01.pdf |
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