Differentiation and Risk Aversion in Imperfectly Competitive Labor Markets - 10.1628/jite-2020-0044 - Mohr Siebeck
Economics

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

Differentiation and Risk Aversion in Imperfectly Competitive Labor Markets

Online First, pp. 1-27 (27)
Published 12.10.2020

27,00 € including VAT
article PDF
We examine the effect of imperfect labor market competition on the efficiencyof 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.
Authors/Editors

Christina E. Bannier No current data available.

Eberhard Feess No current data available.

Natalie Packham No current data available.

Markus Walzl No current data available.