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Why, in the labor market, are contracts often designed to include a variable salary component that ...

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Why, in the labor market, are contracts often designed to include a variable salary component that ...

Why, in the labor market, are contracts often designed to include a variable salary component that is tied to some measure of performance?

▸ Such contracts are considered the fairest to employees under fair labor standard laws.

▸ Most people are risk-averse and thus variability in their compensation leads to higher total utility.

▸ Firms use such contracts to differentiate between high and low quality workers.

▸ These contracts tend to attract employees with the lowest probability of switching jobs.

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Principles of Economics

Edition: 12^th

Authors: Case, Fair, Oster

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christinaalex

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More solutions for this book are available here

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parneetgill Author

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This site is awesome!

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Good luck on the rest

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