"Inside  every small problem is a large problem struggling to get out."

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Respond to the question: Labour economics efficiency wage?

 01/24/2001 10:59 AM by Brandon; Efficiency wage model
Hi Rodrigo! It's not from a textbook but from my LSE subject guide (for external students) on Managerial Economics, rather. The equation:
(w+g)(1-p) + (bp) <w or w>g(1-p)/p +b
comes from the guide itself. This question appeared as a sample exercise question though (without solutions): Review the min cost implementation problem for efficiency wage and use this model to discuss whether efficiency wage would be higher/lower than in the standard model is employees dislike monitoring.

This participant constraint:
w > b - D(p)
appeared as a "hint" for us to attempt the question with. Actually, I'm curious as to whether there might be a typo error. Perhaps the equation should be
w > b + D(p) ?
As I see it, if I rearrange the equation, it will then be:
w - D(p) > b
which means that the "net wages" after adjustment for discomfort, should be greater than the benefit the worker can get if he's fired, so that he would remain in the job, and bear with the discomfort that comes along with monitoring. Do I make sense here? :)

[Manage messages]

 01/23/2001 04:33 PM by Rodrigo;
Brandon, this looks like a question in some book. Please tell me which book this question is from, so that I can take a look at the specific model of efficiency-wages the question is about, and then try to help you. Regards. [View full text and thread]

 01/19/2001 10:30 AM by Brandon; Labour economics (efficiency wage)
Hi! I was going through some questions on the above topic and didn't quite understand the following...hope to gather some insights :) Question: Review the min cost implementation problem for efficiency wage and use this model to [View full text and thread]