Fair Wages When Employers Face the Risk of Losing Money

Authors

  • Karina Gose
  • Abdolkarim Sadrieh

DOI:

https://doi.org/10.24352/UB.OVGU-2018-452

Keywords:

fair wage, efficiency wage, social comparison, loss aversion

Abstract

We study the behavior of employers and employees in a gift exchange game and find that employers offer lower wages when there is the risk of losing money. This, however, does not lead to lower effort level choices. In fact, effort per wage unit is significantly higher in the treatment with potential employer losses. This result can be in line with social comparison theories that are based on relative payoff differences. Alternatively, this result is also in line with the hypothesis that the risk of losing money increases the credibility of the employer's trust signal and, thus, the employee's reciprocity.

Downloads

Published

2018-10-12

Issue

Section

Artikel