Wage Premiums and Profit Maximization in Efficiency Wage Models.
The standard shirking model of efficiency wages is essentially a continuous-time, repeated prisoners' dilemma game. Thus, to sustain an equilibrium with employment requires sufficient gains from future cooperation. Each division of these gains corresponds to some equilibrium. Efficiency wages correspond to employees receiving the gains. Bonds allow firms to receive them. In markets well informed about agents' pasts, employment is independent of the distribution of gains. But in anonymous mark...Expand abstract
- European Economic Review
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