EconPapers    
Economics at your fingertips  
 

Long-Term Employment Relations When Agents are Present Biased

Florian Englmaier (), Matthias Fahn and Marco Schwarz

No 13227, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze how agents' present bias affects optimal contracting in an infinite-horizon employment setting. The principal maximizes profits by offering a menu of contracts to naive agents: a "virtual" contract - which agents plan to choose in the future - and a "real" contract which they end up choosing. This virtual contract motivates the agent and allows the principal to keep the agent below his outside option. Moreover, under limited liability, implemented effort can be inefficiently high. With a finite time horizon, the degree of exploitation of agents decreases over the life-cycle. While the baseline model abstracts from moral hazard, we show that the result persists also when allowing for non-contractible effort.

Keywords: Dynamic Contracting; employment relations; present bias (search for similar items in EconPapers)
JEL-codes: D03 D21 J31 M52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-hrm, nep-lma and nep-mic
Date: 2018-10
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13227 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Long-Term Employment Relations when Agents Are Present Biased (2017) Downloads
Working Paper: Long-Term Employment Relations when Agents are Present Biased (2016) Downloads
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:cpr:ceprdp:13227

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=13227

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-04-03
Handle: RePEc:cpr:ceprdp:13227