Optimal Compensation in Competitive Labor Markets with Heterogeneous Employers and Workers

Samuel Haefner (), Niklas Haeusle (), Winfried Koeniger and Alexander Braun ()

No 2405, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: We develop a model in which large risk-neutral firms and individual risk-averse consumers compete to employ heterogeneous workers by posting compensation menus. Production takes time, and we analyze how screening motives interact with the desire to smooth consumption. There is a unique symmetric separating equilibrium that is also efficient. In equilibrium, the extent to which the compensation scheme delays payment until the production quality becomes known depends on whether, and to which extent, the consumers are financially constrained. We discuss how our model relates to the design of compensation schemes in current online peer-to-peer markets.

Keywords: Adverse selection; Self selection; Peer-to-peer markets; Labor markets; Capital market imperfections (search for similar items in EconPapers)
JEL-codes: D15 D82 D86 E24 J33 M52 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2024-11
New Economics Papers: this item is included in nep-com, nep-cta, nep-hrm and nep-lma
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http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-2405.pdf (application/pdf)

Related works:
Working Paper: Optimal Compensation in Competitive Labor Markets with Heterogeneous Employers and Workers (2024)
Working Paper: Optimal Compensation in Competitive Labor Markets with Heterogeneous Employers and Workers (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2024:05

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