CEF.UP – FIN Seminar/Webinar

Thursday – May 19^th, 2022 at 1:00 p.m. |Room 305| Online

“Negotiating Compensation“

Vladimir Vladimirov – University of Amsterdam (joint work with Florian Hoffmann)

Abstract:

“Workers can often negotiate their compensation. We develop a model showing that optimal negotiations and compensation design depend on whether capital and labor are substitutes or complements. This distinction — closely related to whether labor is low- or high-skilled — further affects whether workers can extract higher compensation by negotiating with fewer firms or by searching for additional job offers. It also affects whether cash constraints inflate or depress compensation when firms compete for workers. By solving for the optimal mechanism for workers to sell their labor, we further show how workers can compare different types of offers and negotiate with firms with different bargaining power.”