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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Present bias in the labor market - when it pays to be naive |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | Games and Economic Behavior |
| Publisher | Elsevier |
| Geographical Reach | international |
| ISSN | 0899-8256 |
| Volume | 135 |
| Page Range | 144 - 167 |
| Date | 2022 |
| Abstract Text | We study optimal employment contracts for present-biased employees if firms cannot commit to long-term contracts. Assuming that an employee's effort increases his chances to obtain a future benefit, we show that individuals who are naive about their present bias will actually be better off than sophisticated or time-consistent individuals. Moreover, firms might benefit from being ignorant about the extent of an employee's naiveté. Our results also indicate that naive employees might be harmed by policies such as employment protection or a minimum wage, whereas sophisticated employees are better off. |
| Digital Object Identifier | 10.1016/j.geb.2022.06.003 |
| Other Identification Number | merlin-id:23271 |
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| Keywords | Present bias, labor markets, on-the-job search, moral hazard |