A model of income distribution in a revenue-sharing firm

Income distribution within a fixed-membership firm is modeled assuming that all net revenue is distributed to workers. The payment system used is a generalization, for heterogeneous workers, of an income equation first adopted by Sen. We introduce the assumption that payment rates for different workers are chosen to maximize an individualistic welfare function for the firm. A general result for a maximin welfare function is obtained and, using a simulation, we explore the effects of different elasticities of substitution in individual utility functions and different weights put on egalitarianism in the welfare function.