Efficiency Wages and Negotiated Profit-Sharing under Uncertainty
AbstractEfficiency wage effects of profit sharing are combined with option values related to stochastic future profit variations. These option effects occur if the workers’ profit share is fixed by long-term contracts. The Pareto-improving optimal level of the sharing ratio is calculated for two different scenarios. First, if the firm can unilaterally decide, the expected present value of net profits is maximised. Second, if the sharing ratio is based on bilateral Nash bargaining. Since a larger variation of revenues implies a higher redistribution of future profits, the inclusion of expected variations results in a lower worker’s profit ratio in both scenarios.
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Bibliographic InfoPaper provided by Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) in its series MAGKS Papers on Economics with number 200919.
Length: 15 pages
Date of creation: 2009
Date of revision:
Publication status: Forthcoming in
Other versions of this item:
- Matthias Göcke, 2011. "Efficiency Wages and Negotiated Profit-Sharing under Uncertainty," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 57(2), pages 91-105.
- Göcke, Matthias, 2009. "Efficiency wages and negotiated profit-sharing under uncertainty," Discussion Papers 42, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-05 (All new papers)
- NEP-BEC-2009-04-05 (Business Economics)
- NEP-LAB-2009-04-05 (Labour Economics)
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