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The Virtue of Being Underestimated: A Note on Discriminatory Contracts in Hidden Information Models

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  • Schnedler, Wendelin

    (University of Paderborn)

Abstract

A standard hidden information model is considered to study the influence of the a priori productivity distribution on the optimal contract. A priori more productive (hazard rate dominant) agents work less, enjoy lower rents, but generate a higher expected surplus.

Suggested Citation

  • Schnedler, Wendelin, 2001. "The Virtue of Being Underestimated: A Note on Discriminatory Contracts in Hidden Information Models," IZA Discussion Papers 342, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp342
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    References listed on IDEAS

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    1. Altonji, Joseph G. & Blank, Rebecca M., 1999. "Race and gender in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 48, pages 3143-3259, Elsevier.
    2. Nahum D. Melumad & Dilip Mookherjee & Stefan Reichelstein, 1995. "Hierarchical Decentralization of Incentive Contracts," RAND Journal of Economics, The RAND Corporation, vol. 26(4), pages 654-672, Winter.
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    Cited by:

    1. Schnedler Wendelin, 2011. "You Don’t Always Get What You Pay For: Bonuses, Perceived Income and Effort," German Economic Review, De Gruyter, vol. 12(1), pages 1-10, February.

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    More about this item

    Keywords

    stochastic order relation; statistical discrimination; Adverse selection;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J71 - Labor and Demographic Economics - - Labor Discrimination - - - Hiring and Firing

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