Effort Observability and Wage Promotion in an Internal Labor Market

  • Moriki HosoeEmail author


This paper discusses various aspects of optimal wage contracts in a hierarchical firm. Contracts of wage payment which we introduce are based not only on the amount of the realized revenue (or outputs) but also on a ranking of the observed effort of workers. The principal-agent problem has dealt with optimal incentive contracts where there is difficulty in observing agent’ effort due to the existence of a random factor unobservable to a firm.


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© Springer Nature Singapore Pte Ltd. 2020

Authors and Affiliations

  1. 1.Emeritus ProfessorKyushu UniversityHigashi-ku, FukuokaJapan

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