Purposely Induced Asymmetric Information

Howard C Petith

Bulletin of Economic Research, 1988, vol. 40, issue 4, 301-08

Abstract: The theory of optimal employment contracts under asymmetric information general ly assumes that the firm is unable to convince workers about the truth of its reports concerning the state of the world. However, evidence indicates that firms are actually unwilling to reveal information for reasons connected with collective bargaining. The present note sets out a bargaining model which rationalizes this attitude and shows tha t it may cause employment to diverge from its optimal level. Copyright 1988 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1988
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