Open AccessThe Fixed Wage Puzzle: Why Profit Sharing is so Hard to Implement
Author(s) -
Jürgen Jerger,
Jochen Michaelis
Publication year - 2010
Publication title -
ssrn electronic journal
Language(s) - English
Resource type - Journals
ISSN - 1556-5068
DOI - 10.2139/ssrn.1713745
Subject(s) - profit sharing , wage , pareto principle , rationality , microeconomics , economics , profit (economics) , bounded rationality , incomplete contracts , perspective (graphical) , labour economics , computer science , operations management , finance , incentive , artificial intelligence , political science , law
Profit sharing arrangements Pareto-dominate fixed wage contracts, but are (far) less than ubiquitous. We account for this fixed wage puzzle by adopting a perspective of bounded rationality. Specifically, plausible share arrangements are not generally acceptable to both firms and unions.
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