What are the benefits of employee vacations, both to the employer and to the employee

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Tod ThielLv2

17 Dec 2018

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The following represents the potential outcomes of your first salary negotiation after graduation:

Assuming this is a sequential move game with the employer moving first, indicate most likely outcome. Does the ability to move first give the employer an advantage? If so, how? As the employee, is there anything you could do to realize a higher payoff?

		Employer
Low Salary Offer			High Salary Offer
Employee Walks	Employee Accepts		Employee Walks	Employee Accepts
Employer gets 0	Employer gets 100		Employer gets 0	Employer gets 100
Employee gets 0	Employee Gets 75		Employee gets 0	Employee Gets 75

The following represents the potential outcomes of your first salary negotiation after graduation:

Assuming this is a sequential move game with the employer moving first, indicate most t likely outcome. Does the ability to move first give the employer an advantage? If so, how? As the employee, is there anything you could do to realize a higher payoff?

		Employer
Low Salary Offer			High Salary Offer
Employee Walks	Employee Accepts		Employee Walks	Employee Accepts
EmployThe employer0	Employer gets 100		EmployThe employer0	Employer gets 75
EmployThe employee0	Employee Gets 75		EmployThe employee0	Employee Gets 100

yellowbuffalo705

Consider a risk neutral employer and a risk neutral employee. The employee can either work hard or not. Let L for low effort or H for high effort correspond to its effort level. If the employee exercises low efforts, then it has an associated cost of 3 to him.But he generates profits for the employer of 8 with propability .5 and 0 with probability of .5 . If the employee exercises low efforts, then it has an associated cost of 4 to him. But he generates profits for the employer of 8 with probability .75 and 0 with probability .25 . Assume that the employee maximizes his pay minus his costs and it has an outside opportunity of 0 (no effort no rewards). If the employer can only offer a take or leave it offer before observing the effort level:

1. Set up the problem the employer faces

2. Set up the problem the employee faces

3. Can the employer offer a wage to induce high efforts?

4. If the employee is willing to wait after the employer sees the outcome to get paid (i.e a bonus scheme) would your answer change? If so, how?

5. If the employer can observe the effort level before he pays his employee, what should he do?