Asymmetric employer information, promotions, and the wage policy of firms

Simon Dato, Andreas Grunewald, Matthias Kräkel and Daniel Müller

Games and Economic Behavior, 2016, vol. 100, issue C, 273-300

Abstract: This paper provides evidence that inefficient promotion strategies and large wage increases upon promotion may both arise as a consequence of asymmetric employer information. Building on the seminal work by Waldman (1984a) and Milgrom and Oster (1987), we first present a model that illustrates how both phenomena may jointly arise due to the information revealing character of promotions. Using experimental labor markets, we find evidence consistent with asymmetric employer information being a causal factor for both inefficient promotions and large wage increases upon promotion. Furthermore, we analyze the effect of asymmetric employer information on profits and turnover.

Keywords: Invisibility hypothesis; Poaching; Promotion-as-signal hypothesis (search for similar items in EconPapers)
JEL-codes: C91 D82 J3 M5 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0899825616301166
Full text for ScienceDirect subscribers only

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:eee:gamebe:v:100:y:2016:i:c:p:273-300

DOI: 10.1016/j.geb.2016.09.013

Access Statistics for this article

Games and Economic Behavior is currently edited by E. Kalai

More articles in Games and Economic Behavior from Elsevier
Bibliographic data for series maintained by Catherine Liu ().