Faculty of Economics and Business Administration Publications Database

Worker Self-Selection and the Profits from Cooperation

Volume: 7
Number: 2-3
Pages: 573 - 582
Month: April-May
ISSN-Print: 1542-4766
Link External Source: Online Version
Year: 2009
Keywords: Labor market; Production functions; Competition; Equilibrium; Teams in the workplace; Profitability; Cooperation; Production
Abstract: We investigate a competitive labor market with team production. Workers differ in their motivation to exert team effort, and types are private information. We show that there can exist a separating equilibrium in which workers self-select into different firms and firms employing cooperative workers make strictly positive profits. Profit differences across firms persist because cooperation strictly increases output and worker separation requires firms employing cooperative workers to pay out weakly lower wages.