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Acceptable Contracts, Opportunism, and Rigid Hourly Wages

  • Roger A. McCain
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    This paper presents a model of opportunism and contingent wage schedules in labor markets, which is, in a sense, intermediate between the "implicit" and explicit contract approaches. The "expected utility" condition is not a part of the contract, but is a condition for the acceptability of a contract form by employees. Contract forms are constrained by conditions that are enforcable ex post. Of the contract forms examined, the only one mutually acceptable is one with inflexible hourly wages.

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    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 13 (1987)
    Issue (Month): 3 (Jul-Sep)
    Pages: 205-213

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    Handle: RePEc:eej:eeconj:v:13:y:1987:i:3:p:205-213
    Contact details of provider: Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
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    1. Kahn, Charles M. & Green, Jerry, 1983. "Wage-Employment Contracts," Scholarly Articles 3203642, Harvard University Department of Economics.
    2. Benjamin Klein, 1984. "Contract Costs and Administered Prices: An Economic Theory of Rigid Wages," UCLA Economics Working Papers 318, UCLA Department of Economics.
    3. repec:oup:qjecon:v:98:y:1983:i:3:p:123-56 is not listed on IDEAS
    4. Akerlof, George A & Yellen, Janet L, 1985. "Can Small Deviations from Rationality Make Significant Differences to Economic Equilibria?," American Economic Review, American Economic Association, vol. 75(4), pages 708-20, September.
    5. repec:oup:qjecon:v:98:y:1983:i:3:p:173-87 is not listed on IDEAS
    6. Eckalbar, John C, 1980. "The Stability of Non-Walrasian Processes: Two Examples," Econometrica, Econometric Society, vol. 48(2), pages 371-86, March.
    7. Robert E. Hall & Edward P. Lazear, 1982. "The Excess Sensitivity of Layoffs and Quits to Demand," NBER Working Papers 0864, National Bureau of Economic Research, Inc.
    8. Martin Neil Baily, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 37-50.
    9. repec:oup:qjecon:v:98:y:1983:i:3:p:107-22 is not listed on IDEAS
    10. Oliver D. Hart, 1983. "Optimal Labour Contracts under Asymmetric Information: An Introduction," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 3-35.
    11. repec:oup:qjecon:v:98:y:1983:i:3:p:157-72 is not listed on IDEAS
    12. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
    13. repec:oup:qjecon:v:98:y:1983:i:3:p:1-22 is not listed on IDEAS
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