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Worker Reputation and Productivity Incentives

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Author Info
Aron, Debra J
Abstract

This paper examines firms' problems of how to motivate risk-averse workers not to shirk whe n workers' utility functions are unknown. The problem is studied in a two-period setting in which a worker's actions today can influence n ot only his compensation today but the firms' beliefs about his prefe rences. Firms cannot credibly commit to ignore the revealed informati on, so workers' actions today affect their future compensation contra cts. It is shown that, in the Wilson-Miyazaki equilibrium, firms may pool workers and learn about their types gradually over time rather t han inducing them to separate and reveal their types immediately. Copyright 1987 by University of Chicago Press.

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Article provided by University of Chicago Press in its journal Journal of Labor Economics.

Volume (Year): 5 (1987)
Issue (Month): 4 (October)
Pages: S87-106
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Handle: RePEc:ucp:jlabec:v:5:y:1987:i:4:p:s87-106

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  1. Robert Gibbons & Kevin J. Murphy, 1992. "Optimal Incentive Contracts in the Presence of Career Concerns: Theory and Evidence," NBER Working Papers 3792, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Gersbach, Hans & Glazer, Amihai, 2004. "High Compensation Creates a Ratchet Effect," IZA Discussion Papers 1143, Institute for the Study of Labor (IZA). [Downloadable!]
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  3. Botond Koszegi & Wei Li, 2002. "Ambition and Talent," IEHAS Discussion Papers 0214, Institute of Economics, Hungarian Academy of Sciences. [Downloadable!]
  4. C. Stowe, 2009. "Incorporating morale into a classical agency model: implications for incentives, effort, and organization," Economics of Governance, Springer, vol. 10(2), pages 147-164, April. [Downloadable!] (restricted)
  5. Daniel R. Vincent, 1989. "Bilateral Monopoly, Non-durable Goods and Dynamic Trading Relationships," Discussion Papers 832, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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