Efficiency wage effects of profit sharing are combined with option values related to stochastic future pofit 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...

Efficiency wage effects of profit sharing are combined with option values related to stochastic future pofit 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...

Profit sharing can lead to higher productivity and thus to higher firm profitability and employee wages. It may also enhance employment stability by enabling firms to adjust wages during downturns rather than lay off workers. While adoption of profit sharing increases earnings fluctuations, it...

We investigate the implications of product market imperfections on profit sharing, wage negotiation and equilibrium unemployment. The optimal profit share, which the firms use as a wage-moderating commitment device, is below the bargaining power of the trade union. Intensified product market...

We study firms' incentives to offer profit-sharing schemes in a unionized differentiated goods duopoly in which firms bargain with a sector-wide union or firm-specific unions over the selected remuneration schemes. We show that unions always prefer to form a sector-wide union and conduct...

Many incentive contracts are inherently ambiguous, lacking an explicit mapping between performance and pay. Using an online labor market, Amazon Mechanical Turk, we study the effect of ambiguous incentives on willingness to accept contracts to do a real-effort task, the probability of completing...

We analyze a market game where firms choose capacities under uncertainty about future market conditions and make output choices after uncertainty has unraveled. We show existence and uniqueness of equilibrium under imperfect competition and establish that capacity choices by strategic firms are...