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A Rent Extraction View of Employee Discounts and Benefits

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  • Anthony M. Marino
  • Ján Zábojník

Abstract

We examine how firms can use employee discounts and perks to extract information rents from employees who have private information about their preferences and outside opportunities. The firm creates different bundles of the perk and salary in response to different employee characteristics and marginal costs of the perk. Strategic bundling can lead firms to provide perks even without a cost advantage over the outside market and to deviate from the marginal cost pricing. We characterize how optimal perk provision depends on the set of feasible contracts, on the perk's marginal cost, and on the perk's price in the outside market. (c) 2008 by The University of Chicago.

Suggested Citation

  • Anthony M. Marino & Ján Zábojník, 2008. "A Rent Extraction View of Employee Discounts and Benefits," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 485-518, July.
    • Handle: RePEc:ucp:jlabec:v:26:y:2008:i:3:p:485-518
    DOI: 10.1086/587761
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    Cited by:

    1. Sebastian Kube & Michel Andre Marechal & Clemens Puppe, 2012. "The Currency of Reciprocity: Gift Exchange in the Workplace," American Economic Review, American Economic Association, vol. 102(4), pages 1644-1662, June.
    2. Michael D. Grubb & Paul Oyer, 2008. "Who Benefits from Tax-Advantaged Employee Benefits?: Evidence from University Parking," NBER Working Papers 14062, National Bureau of Economic Research, Inc.
    3. Adithipyangkul, Pattarin, 2012. "Non-cash compensation with production externalities and agency problems related to an agent’s consumption choice," Journal of Contemporary Accounting and Economics, Elsevier, vol. 8(2), pages 110-120.
    4. Xiaoyi Ren & Xing Liu & Zongtao Tian, 2020. "Excess perks in SOEs: evidence from China," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 34(2), pages 152-165, November.
    5. Weinschenk, Philipp, 2013. "Compensation, perks, and welfare," Economics Letters, Elsevier, vol. 120(1), pages 67-70.
    6. Anthony Marino, 2015. "Work environment and moral hazard," Journal of Regulatory Economics, Springer, vol. 48(1), pages 53-73, August.

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    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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