IDEAS home Printed from
   My bibliography  Save this article

The fixed wage puzzle: Why profit sharing is so hard to implement


  • Jerger, Jürgen
  • Michaelis, Jochen


Profit sharing arrangements Pareto-dominate fixed wage contracts, but are (far) less than ubiquitous. We account for this fixed wage puzzle by adopting a perspective of bounded rationality. Specifically, plausible share arrangements are not generally acceptable to both firms and unions.

Suggested Citation

  • Jerger, Jürgen & Michaelis, Jochen, 2011. "The fixed wage puzzle: Why profit sharing is so hard to implement," Economics Letters, Elsevier, vol. 110(2), pages 104-106, February.
  • Handle: RePEc:eee:ecolet:v:110:y:2011:i:2:p:104-106

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. Michaelis, Jochen, 1997. "On the equivalence of profit and revenue sharing," Economics Letters, Elsevier, vol. 57(1), pages 113-118, November.
    2. 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, March.
    3. Benjamin Bental & Dominique Demougin, 2006. "Incentive Contracts And Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 1033-1055, August.
    4. Jerger, Jurgen & Michaelis, Jochen, 1999. " Profit Sharing, Capital Formation and the NAIRU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(2), pages 257-275, June.
    5. Thomas Dohmen & Armin Falk & David Huffman & Uwe Sunde & Juergen Schupp & Gert Wagner, 2005. "Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey," Working Papers 2096, The Field Experiments Website.
    6. 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 1003-1020, December.
    7. Richard Watt, 2002. "Defending Expected Utility Theory: Comment," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 227-229, Spring.
    8. Holmlund, Bertil, 1990. "Profit Sharing, Wage Bargaining, and Unemployment," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 257-268, April.
    9. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    10. 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 923-942, October.
    11. repec:feb:framed:0019 is not listed on IDEAS
    12. Kirstein, Roland & Kirstein, Annette, 2004. "Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies," CSLE Discussion Paper Series 2004-09, Saarland University, CSLE - Center for the Study of Law and Economics.
    13. Maria Brouwer, 2005. "Managing Uncertainty through Profit Sharing Contracts from Medieval Italy to Silicon Valley," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 9(3), pages 237-255, September.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Marco Pinto & Jochen Michaelis, 2016. "The labor market effects of trade unions in an open economy: Layard meets Melitz," International Economics and Economic Policy, Springer, vol. 13(2), pages 223-232, April.

    More about this item


    Profit sharing Share economy Remuneration systems;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:110:y:2011:i:2:p:104-106. 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: (Dana Niculescu). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.