EconPapers    
Economics at your fingertips  
 

Consumption Commitments and Employment Contracts, Fourth Version

Andrew Postlewaite, Larry Samuelson (larrysam@ssc.wisc.edu) and Dan Silverman
Additional contact information
Larry Samuelson: Department of Economics, University of Wisconsin and Yale University

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We examine an economy in which the cost of consuming some goods can be reduced by making commitments that reduce flexibility. We show that such consumption commitments can induce consumers with risk-neutral underlying utility functions to be risk averse over small variations in income, but sometimes to seek risk over large variations. As a result, optimal employment contracts will smooth wages conditional on being employed, but may incorporate a possibility of unemployment.

Keywords: Unemployment; consumption commitments; optimal contracts (search for similar items in EconPapers)
JEL-codes: D21 D31 D81 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-12-07, Revised 2007-07-09
New Economics Papers: this item is included in nep-bec and nep-dge
References: Add references at CitEc
Citations:

Downloads: (external link)
https://economics.sas.upenn.edu/sites/default/file ... ng-papers/07-020.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:07-020

Access Statistics for this paper

More papers in PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania 133 South 36th Street, Philadelphia, PA 19104. Contact information at EDIRC.
Bibliographic data for series maintained by Administrator (pier@econ.upenn.edu).

 
Page updated 2024-12-28
Handle: RePEc:pen:papers:07-020