2. Which of the following statements best describes the game played by the emplo

Question

2. Which of the following statements best describes the game played by the employer and the employee in the labor discipline model? Select correct answer a. The game is a simultaneous game where the employer chooses the wage level and the b. The game is a one-off game where the wage and effort levels are determined once and for c. The worker selects the effort level that balances his desire to keep his job with his desire to d. The employer will attempt to maximize the firm's profits by offering a wage equal to the employee chooses the effort level simultaneously. all. not exhaust himself on the job. worker's reservation wage.

Explanation / Answer

The correct choice for this question is option number c

These are basically efficiency wage models where the worker will be willing to work for a given level of effort chosen by him. This level of effort is not observable from the point of view of employer and hence there is an uncertainty about the level of effort put in by the employee. The worker will be selecting his effort level which will depend upon his cost of that effort and the wage received by him.

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