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Does it pay to pay more?. Edition No. 1
VDM Publishing House, Dec 2009, Pages: 148
Often firm-worker relationships are characterized by incompleteness of contracts i.e. the firm offers a wage and states a desired effort to be exhibited by the worker. However, ultimately it is within the discretion of the worker to actually provide this effort. Anticipating a positive effect of wage height on effort provision and the propensity of humans to reciprocate behavior perceived as kind or fair, it may payoff for firms to pay higher wages when tight monitoring or sanctioning of effort underprovision is not possible. Exploring potentially influential factors on effort provision of workers, two different institutional settings are investigated - a non-competitive labour market versus a competitive environment. As a second dimension the costs associated with effort provision are investigated with respect to their potential to influence behavior. Bringing the two dimensions together a systematic analysis allows inferences about the importance of particular factors for the effort provision decision of the worker in four distinctly different situational settings.
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