Informal incentive labour contracts and product market competition

Nicola Meccheri () and Luciano Fanti

Discussion Papers from Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy

Abstract: This paper studies the dynamic interaction between product market competition and incentives against shirking. It is shown that efficiency wages can both increase and decrease when competition becomes fiercer. Instead, discretionary bonuses do not vary with competition but there exists an upper threshold for the number of competing firms, over which such schemes are no longer sustainable as equilibrium. Finally, industry profits under bonuses are generally higher than under efficiency wages, but the reverse actually applies when information about firms' misbehaviour flows at a low rate and the number of firms exceeds the critical threshold.

Keywords: efficiency wages; discretionary bonuses; competition; industry profits. (search for similar items in EconPapers)
JEL-codes: J33 J41 L13 (search for similar items in EconPapers)
Date: 2012-06-01
New Economics Papers: this item is included in nep-com, nep-cta, nep-hrm and nep-lma
Note: ISSN 2039-1854
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Informal incentive labour contracts and product market competition (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pie:dsedps:2012/139

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