The fixed wage puzzle: Why profit sharing is so hard to implement

Zusammenfassung

Profit sharing arrangements Pareto-dominate fixed wage contracts, but are (far) less than ubiquitous. We account for this fixed wage puzzle by adopting a perspective of bounded rationality. Specifically, plausible share arrangements are not generally acceptable to both firms and unions. (C) 2010 Elsevier B.V. All rights reserved.