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Quality of Goods and Labor Efficiency in Perfect and Asymmetric Information Environments

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  • Farah Hachicha

Abstract

This paper studies how to design optimal portfolio of contracts between a firm, his consumers and his workers when quality of good and quality of labor are unobservable. Under complete information every body gets paid at his marginal cost. Under asymmetric information environment, it is shown that contrary to the literature on the goods market there is no distortion of the low level of quality of good but there is an increase of high quality of good. On the labor market, there is no distortion of high type worker but there is a distortion for the low type worker: his second best effort is lower than in complete information.

Suggested Citation

  • Farah Hachicha, 2016. "Quality of Goods and Labor Efficiency in Perfect and Asymmetric Information Environments," Revue d'économie politique, Dalloz, vol. 126(5), pages 871-894.
    • Handle: RePEc:cai:repdal:redp_265_0871
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