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The Fixed Wage Puzzle : Why Profit Sharing Is So Hard to Implement

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  • Jürgen Jerger

    ()
    (Osteuropa-Institut, Regensburg (Institut for East European Studies))

  • Jochen Michaelis

    ()
    (University of Kassel)

Abstract

It is well known that profit sharing arrangements Pareto-dominate fixed wage contracts. Share agreements are (far) less than ubiquitous, however. This paper offers a solution of this „fixed wage puzzle“ by adopting a perspective of bounded rationality. We show that share arrangements that fulfill „plausible“ constraints are not generally acceptable to both firms and unions.

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Paper provided by Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies) in its series Working Papers with number 283.

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Length: 13
Date of creation: Apr 2010
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Handle: RePEc:ost:wpaper:283

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  1. Erkki Koskela & Rune Stenbacka, 2006. "Flexible and Committed Profit Sharing with Wage Bargaining: Implications for Equilibrium Unemployment," Journal of Economics, Springer, vol. 87(2), pages 159-180, 03.
  2. Maria Brouwer, 2005. "Managing Uncertainty through Profit Sharing Contracts from Medieval Italy to Silicon Valley," Journal of Management and Governance, Springer, vol. 9(3), pages 237-255, 09.
  3. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Jurgen Schupp & Gert Wagner, 2005. "Individual risk attitudes: New evidence from a large, representative, experimentally-validated survey," Framed Field Experiments 00140, The Field Experiments Website.
  4. Michaelis, Jochen, 1997. "On the equivalence of profit and revenue sharing," Economics Letters, Elsevier, vol. 57(1), pages 113-118, November.
  5. Holmlund, Bertil, 1990. "Profit Sharing, Wage Bargaining, and Unemployment," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 257-68, April.
  6. Roland Kirstein & Annette Kirstein, 2007. "Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies," FEMM Working Papers 07004, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  7. Farber, Henry S, 1978. "Individual Preferences and Union Wage Determination: The Case of the United Mine Workers," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 923-42, October.
  8. Demougin, Dominique M. & Bental, Benjamin, 2004. "Incentive Contracts and Total Factor Productivity," Papers 2004,41, Humboldt-Universität Berlin, Center for Applied Statistics and Economics (CASE).
  9. Jerger, Jurgen & Michaelis, Jochen, 1999. " Profit Sharing, Capital Formation and the NAIRU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(2), pages 257-75, June.
  10. repec:feb:framed:0019 is not listed on IDEAS
  11. Carruth, Alan A & Oswald, Andrew J, 1985. "Miners' Wages in Post-war Britain: An Application of a Model of Trade Union Behaviour," Economic Journal, Royal Economic Society, vol. 95(380), pages 1003-20, December.
  12. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  13. Richard Watt, 2002. "Defending Expected Utility Theory: Comment," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 227-229, Spring.
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