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Can Wages Signal Kindness?

Emrah Arbak and Laurence Kranich ()

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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; asymmetric information; behavioral economy; game theory; labour relations; reciprocity; altruisme; économie comportementale; information asymétrique; réciprocité; relations de travail; théorie des jeux (search for similar items in EconPapers)
Date: 2005-11
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Published in 2005

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Handle: RePEc:hal:journl:halshs-00180032