Christina E. Bannier, Eberhard Feess, Natalie Packham, Markus Walzl

Differentiation and Risk Aversion in Imperfectly Competitive Labor Markets

Jahrgang 177 () / Heft 1, S. 1-27 (27)
Publiziert 12.10.2020

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We examine the effect of imperfect labor market competition on the efficiency of compensation schemes in a setting with moral hazard and risk-averse agents who have private information on their ability. Two heterogeneous firms compete for agents by offering contracts with fixed and variable payments. When competition is low, low-ability agents are underincentivized, exerting too little effort. When competition is high, high-ability agents are overincentivized and bear too much risk. For intermediate competition, contracts are second-best. An equilibrium where both firms are active exists only when the least-cost separating allocation is interim efficient.

Christina E. Bannier Keine aktuellen Daten verfügbar.

Eberhard Feess Keine aktuellen Daten verfügbar.

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