Time will tell if the candy becomes popular, May said, but the Shirks "are on the right track by offering something different.
The Shirks seems to understand the importance of getting the word out by offering free samples and other promotional ideas, May said.
Not only do owners overpay some players for subpar performances, but by divorcing pay from performance, owners provide players with an opportunity to shirk.
However, contract terms and the collective bargaining agreement determine players' ability to shirk.
A standard feature of efficiency wage models is that the probability a worker at the firm does not shirk, q, depends directly on the wage offered by the firm (w), inversely on the alternative wage ([w.
We assume there are diminishing returns to increasing D in terms of increasing the probability the worker does not shirk such that q[prime] [greater than] 0 and q[double prime] [less than] 0.
In deciding whether or not to shirk, an urban worker compares the utility gained from shirking with the difference between the expected utility of an employed urban worker and an unemployed worker, which in turn depends on the difference between the wages.
Since unemployed urban workers end up worse off, urban employers can raise the urban employment level until the urban wage including the subsidy falls to its original level without giving urban workers the incentive to shirk.
The fourth term is the discounted value of the probability that the worker shirks and is caught times the utility of the one-period contract.
Second, workers who shirk consume other goods, such as leisure, which provide direct utility.
Of course, there may be an incentive for the firm to
shirk when compensation is backloaded, but the courts are assumed to regulate the firm's behavior since verification is assumed in these cases.
In other words, the probability that the worker does not
shirk, quit or prove incompetent is a function of the wage.
