Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5071455 | Games and Economic Behavior | 2016 | 28 Pages |
Abstract
This paper provides evidence that inefficient promotion strategies and large wage increases upon promotion may both arise as a consequence of asymmetric employer information. Building on the seminal work by Waldman (1984a) and Milgrom and Oster (1987), we first present a model that illustrates how both phenomena may jointly arise due to the information revealing character of promotions. Using experimental labor markets, we find evidence consistent with asymmetric employer information being a causal factor for both inefficient promotions and large wage increases upon promotion. Furthermore, we analyze the effect of asymmetric employer information on profits and turnover.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Simon Dato, Andreas Grunewald, Matthias Kräkel, Daniel Müller,