Barigozzi, Francesca and Cremer, Helmuth (2024) Shining with the stars: Competition, screening, and concern for coworkers’ quality. Games and Economic Behavior, vol. 144. pp. 250-283.

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Abstract

We study how workers’ concern for coworkers’ ability (CfCA) affects competition in the
labor market. Two firms offer nonlinear contracts to a unit mass of prospective workers.
Firms may differ in their marginal productivity, while workers are heterogeneous in their
ability (high or low) and their taste for being employed by any of the two firms. Workers
receive a utility premium when employed by the firm hiring most high-ability workers and
suffer a utility loss if hired by its competitor. These premiums/losses are endogenously
determined. We characterize contracts and workers’ sorting into the two firms under complete and
private information on workers’ ability. We show that CfCA is detrimental to firms, but it
benefits high-ability workers, especially when their ability is observable. In addition, CfCA
exacerbates the existing distortion in high-ability workers’ sorting into the two firms.

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• Shining with the stars: competition, screening, and concern for coworkers' quality. (deposited 09 Nov 2021 13:20)
  • Shining with the stars: Competition, screening, and concern for coworkers’ quality. (deposited 13 Feb 2024 08:40) [Currently Displayed]