If he hides information in state 1 and reports nothing instead of high productivity he will be fired for the next period with probability ([p.sub.1] + [p.sub.2] + [p.sub.3]) and he will lose the level of fixed payments in the second period (the second period everyone observes the realization of the parameter [theta] and there is not assymetric information
(1988), "The Development of Corporate Financial Markets in Britain and the United States 1600-1914: Overcoming Assymetric Information
," Business History Review, Vol.
Armando Gomes, University of Pennsylvania, "Going Public with Assymetric Information
: Agency Costs and Dynamic Trading"
(3) In the assymetric information
case, the worker in period 1 will choose: