Risk aversion and the efficiency wage contract

Ouassila Chouikhi and Shyama V. Ramani
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Ouassila Chouikhi: LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - UPMF - Université Pierre Mendès France - Grenoble 2 - CNRS - Centre National de la Recherche Scientifique
Shyama V. Ramani: GAEL - Laboratoire d'Economie Appliquée = Grenoble Applied Economics Laboratory - UPMF - Université Pierre Mendès France - Grenoble 2 - INRA - Institut National de la Recherche Agronomique

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Abstract: The efficiency wage model of Shapiro and Stiglitz (American Economic Review 74: 433–444, 1984) has not always been confirmed by empirical investigations. This could be due to informational problems. Reformulating the Shapiro and Stiglitz model as a sequential game, this paper examines the relations between the terms of the efficiency wage contract offered by a firm and the responses of a worker, under incomplete information about the degree of risk aversion of the firm and the worker. It shows that under incomplete information about the degree of risk aversion of the worker, shirking can emerge as an equilibrium phenomenon. For any efficiency wage contract, a worker will shirk if the degree of risk aversion of the worker is less than that corresponding to the contract.

Keywords: salaire d'efficience; contrat de travail; théorie des jeux; modèle (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (3)

Published in LABOUR, 2004, 18 (1), pp.53-73

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00102638

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