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Efficiency Wages With Heterogeneous Agents

Author

Listed:
  • BRANDON LEHR

    (Department of Economics, Occidental College, 1600 Campus Drive, Los Angeles, CA 90041, USA)

Abstract

This paper builds a model of efficiency wages with heterogeneous workers in the economy who differ with respect to their disutility of labor effort. In such an economy, two types of pure strategy symmetric Nash equilibria in firm wage offers can exist: a no-shirking equilibrium in which all workers exert effort while employed and a shirking equilibrium in which within each firm some workers exert effort while others shirk. The type of equilibrium that prevails in the economy depends crucially on the extent of heterogeneity among the workers and the equilibrium rate at which workers join firms from the unemployment pool.

Suggested Citation

  • Brandon Lehr, 2014. "Efficiency Wages With Heterogeneous Agents," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 16(03), pages 1-23.
    • Handle: RePEc:wsi:igtrxx:v:16:y:2014:i:03:n:s0219198914500078
    DOI: 10.1142/S0219198914500078
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    References listed on IDEAS

    as
    1. van Ours, J. C. & Pfann, G. & Ridder, G., 1993. "Labour Demand and Equilibrium Wage Formation," Other publications TiSEM 185853c8-e889-4b3c-8f62-5, Tilburg University, School of Economics and Management.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Efficiency wages; shirking; heterogeneity; J21; J31; D82;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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