Competition and the Ratchet Effect
Gary Charness,
Peter Kuhn and
Marie Claire Villeval
Journal of Labor Economics, 2011, vol. 29, issue 3, 513 - 547
Abstract:
In labor markets, the ratchet effect refers to a situation where workers subject to performance pay choose to restrict their output, because they rationally anticipate that firms will respond to higher output levels by raising output requirements or by cutting pay. We model this effect as a multiperiod principal-agent problem with hidden information and study its robustness to labor market competition both theoretically and experimentally. Consistent with our theoretical model, we observe substantial ratchet effects in the absence of competition, which are nearly eliminated when competition is introduced; this is true regardless of whether market conditions favor firms or workers.
Date: 2011
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Working Paper: Competition and the Ratchet Effect (2011) 
Working Paper: Competition and the Ratchet Effect (2010)
Working Paper: Competition and the Ratchet Effect (2010)
Working Paper: Competition and the Ratchet Effect (2010) 
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2009)
Working Paper: Competition and the Ratchet Effect (2008) 
Working Paper: Competition and the Ratchet Effect (2008) 
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