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Competition for talent when firms' mission matters

Francesca Barigozzi and Nadia Burani

Games and Economic Behavior, 2019, vol. 116, issue C, 128-151

Abstract: We study optimal non-linear contracts offered by a non-profit and a for-profit firm competing to attract workers, who are privately informed about their ability and motivation. Motivated workers are keen to be hired by the non-profit firm because they adhere to its mission. Workers with different ability self-select into firms depending on which organization holds a competitive advantage. This determines the sign and the composition of the wage differential between firms, which encompasses labor donations induced by motivation and the selection effect of ability. Our model thus rationalizes the mixed empirical evidence concerning for-profit vs non-profit wage differentials.

Keywords: Multi-principals; Bidimensional asymmetric information; Skills; Intrinsic motivation; For-profit vs non-profit organizations; Wage differential (search for similar items in EconPapers)
JEL-codes: D82 D86 J24 J31 M55 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.geb.2019.04.012

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Handle: RePEc:eee:gamebe:v:116:y:2019:i:c:p:128-151