Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/269913 
Year of Publication: 
2022
Series/Report no.: 
Working Paper No. 2204
Publisher: 
Johannes Kepler University of Linz, Department of Economics, Linz
Abstract: 
We study optimal employment contracts for present-biased employees if firms cannot commit to long-term contracts. Assuming that an employee's effort increases his chances to obtain a future benefit, we show that individuals who are naive about their present bias will actually be better off than sophisticated or time-consistent individuals. Moreover, firms might benefit from being ignorant about the extent of an employee's naivet'e. Our results also indicate that naive employees might be harmed by policies such as employment protection or a minimum wage, whereas sophisticated employees are better of
Subjects: 
Present bias
labor markets
on-the-job search
moral hazard
JEL: 
D21
D90
J31
J32
Document Type: 
Working Paper

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