Wesselbaum, Dennis (2009): A Game Theoretical View on Efficiency Wage Theories.
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The efficiency wage theory developed by Akerlof (1982) assumes observability of effort and the ability of firm and worker to commit on their effort/wage decisions. We show that, from a game theoretical point of view, we have to understand the firm/worker relationship as a repeated Prisoner's dilemma. Therefore, cooperation is per se not a (subgame perfect) Nash equilibrium and hence the Akerlof (1982) theory is based upon an implicit assumption of cooperation, which can not be implemented w.l.o.g.. In addition, we find that this approach is a special case of the Shapiro and Stiglitz (1984) approach and hence unify the two approaches.
|Item Type:||MPRA Paper|
|Original Title:||A Game Theoretical View on Efficiency Wage Theories|
|Keywords:||Efficiency Wage, Prisoner's Dilemma, Repeated Game, Subgame Perfect Nash Equilibrium.|
|Subjects:||J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Labor Contracts
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||Dennis Wesselbaum|
|Date Deposited:||20. Oct 2009 19:37|
|Last Modified:||18. Feb 2013 17:39|
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Shapiro, Carl and Joseph E. Stiglitz. 1984. "Equilibrium Unemployment as a Worker Discipline Device." American Economic Review, 74(3): 433-444.