A model of implicit contracts without precommitment on emloyment

Mikko Puhakka
Additional contact information
Mikko Puhakka: Helsinki School of Economics

Finnish Economic Papers, 1989, vol. 2, issue 2, 106-115

Abstract: The purpose of this paper is to analyze an optimal one-period labor contract between one firm and one worker when there is no precommitment on employment. I assume, instead, that implementation is the responsibility of a third party (e.g. court of law) that observes only the wage rate and the state of nature. Under these informational assumptions the first-best contract is no longer attainable even though the state is publicly observed. It is demonstrated in this paper that (i) either the worker or the firm is rationed in every state of nature, except possibly in one state; (ii) the firm is rationed in low states; (iii) the contract stipulates the wage rate and the employment level to be increasing functions of the state whenever the firm is rationed.

Date: 1989
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.taloustieteellinenyhdistys.fi/images/stories/fep/fep19892_2.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:fep:journl:v:2:y:1989:i:2:p:

Access Statistics for this article

More articles in Finnish Economic Papers from Finnish Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Editorial Secretary ( this e-mail address is bad, please contact ).