Efficiency Wages and Negotiated Profit-Sharing under Uncertainty
Matthias Göcke ()
No 200919, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)
Efficiency wage effects of profit sharing are combined with option values related to stochastic future profit variations. These option effects occur if the workers’ profit share is fixed by long-term contracts. The Pareto-improving optimal level of the sharing ratio is calculated for two different scenarios. First, if the firm can unilaterally decide, the expected present value of net profits is maximised. Second, if the sharing ratio is based on bilateral Nash bargaining. Since a larger variation of revenues implies a higher redistribution of future profits, the inclusion of expected variations results in a lower worker’s profit ratio in both scenarios.
JEL-codes: D81 J33 (search for similar items in EconPapers)
Pages: 15 pages
New Economics Papers: this item is included in nep-bec and nep-lab
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https://www.uni-marburg.de/en/fb02/research-groups ... s/19-2009_goecke.pdf First version, 2009 (application/pdf)
Journal Article: Efficiency Wages and Negotiated Profit-Sharing under Uncertainty (2011)
Working Paper: Efficiency wages and negotiated profit-sharing under uncertainty (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200919
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