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Tasks and Types: An Application of Mechanism Design to Self-Selection in Labour Markets

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  • Giuseppe Porro

Abstract

The Baron-Myerson (1982) regulatory mechanism is applied to the screening activity of a monopolist, who hires workers differentiated by quality and assigns them to different tasks. The employer charges a price to the workers for the screening service: necessary and sufficient conditions are provided for a self-selective price function to exist. It is shown that under the optimal price function tasks are assigned in such a way that workers' effort is increasing in workers' quality. It is not necessarily true, however, that the price function must be increasing in workers' quality. A simple two-types model is provided, showing the same results. Also the extension of the model to a dynamic context and, particularly, the requirements of a credible pre-commitment available to the screener are discussed. Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd. 1997.

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Bibliographic Info

Article provided by CEIS in its journal Labour.

Volume (Year): 11 (1997)
Issue (Month): 2 (06)
Pages: 391-406

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Handle: RePEc:bla:labour:v:11:y:1997:i:2:p:391-406

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