Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment
The theoretical foundations of efficiency wages are explored for a model with employees' performance unverifiable. The set of outcomes implementable by self-enforcing (perfect equilibrium) implicit bilateral contracts is characterized. Market equilibrium is then analyzed. Perfect equilibria exist with any division between firm and employee of the gains from employment and with unfilled vacancies and unemployed workers occurring together. A renegotiation proofness criterion ensures that either all workers are employed or all jobs filled, but any division of the gains is still possible. Restrictions on beliefs that result in a Walrasian outcome, and in an efficiency wage outcome, are explored. Copyright 1989 by The Econometric Society.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 57 (1989)
Issue (Month): 2 (March)
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/
More information through EDIRC
|Order Information:|| Web: https://www.econometricsociety.org/publications/econometrica/access/ordering-back-issues Email: |
When requesting a correction, please mention this item's handle: RePEc:ecm:emetrp:v:57:y:1989:i:2:p:447-80. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.