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Can Wages Signal Kindness?

Emrah Arbak () and Laurence Kranich ()

No 511, Working Papers from Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon

Abstract: We model the interaction between an employer and a worker with interdependent preferences in a simple one-shot production process. In particular, we assume that the worker becomes kinder if she senses that her employer is an altruist. We assume that intentions are private information. Thus, the wage proposal signals the intentions of the employer to the worker. We show that if the workers have ”reasonable” beliefs, then the unique prediction of the game is a separating equilibrium outcome in which wages are fully informative about the intentions of the employer. However, if there are several employers simultaneously bidding to hire a single worker, then there may exist another equilibrium in which wages are completely uninformative.

Keywords: Altruism; Reciprocity; Asymmetric information; Labor relations; Behavioral game theory (search for similar items in EconPapers)
JEL-codes: C72 D82 J30 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2005-11
New Economics Papers: this item is included in nep-evo, nep-gth and nep-soc
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

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