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Real Options? Labour Contracts for an Uncertain World

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  • Rowena A Pecchenino

    (Department of Economics, Finance and Accounting, Maynooth University.)

  • Margaret Hurley

    (Department of Economics, Finance and Accounting, Maynooth University.)

  • Julie Byrne

    (Michael Smurfit Graduate School of Business University College Dublin)

Abstract

The standard labour contract is no more. Increasingly it is replaced by flexible and diverse alternative work arrangements that can often be characterized as real options. In this paper we examine optimal labour contracts from the perspective of a competitive firm facing uncertainty concerning both the cost of production and demand for its product or service. We initially restrict the firm to offering ‘standard’ contracts then add various alternative flexibility enhancing contracts. We discuss the circumstances under which these alternative contracts are real options, interpret the strike, compare them to employment contracts currently found in the labour market, and assess the benefits and costs.

Suggested Citation

  • Rowena A Pecchenino & Margaret Hurley & Julie Byrne, 2017. "Real Options? Labour Contracts for an Uncertain World," Economics Department Working Paper Series n283-17.pdf, Department of Economics, National University of Ireland - Maynooth.
    • Handle: RePEc:may:mayecw:n283-17.pdf
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    References listed on IDEAS

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