PURPOSELY INDUCED ASYMMETRTC INFORMATION |
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| Authors: | Howard C Petith |
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| Institution: | University College, Swansea |
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| Abstract: | The theory of optimal employment contracts under asymmetric information generally assumes that the firm is unable to convince workers about the truth of its reports about the state of the world. However evidence indicates that firms are actually unwilling to reveal information for reasons connected with collective bargaining. The present note sets out a bargaining model which rationalizes this attitude and shows that it may cause employment to diverge from its optimal level. |
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