The Baron-Myerson (1982) regulatory mechanism is applied to the screening activity of a monopolist, who hires workers differentiated by quality and assigns them to different tasks. The employer charges a price to the workers for the screening service: necessary and sufficient conditions are provided for a self-selective price function to exist. It is shown that under the optimal price function tasks are assigned in such a way that workers' effort is increasing in workers' quality. It is not necessarily true, however, that the price function must be increasing in workers' quality. The extension of the model to a dynamic context and the requirements of a credible pre-commitment available to the screener are discussed.
Tasks and types: an application of mechanism design to self-selection in labour markets
PORRO, GIUSEPPE
1997-01-01
Abstract
The Baron-Myerson (1982) regulatory mechanism is applied to the screening activity of a monopolist, who hires workers differentiated by quality and assigns them to different tasks. The employer charges a price to the workers for the screening service: necessary and sufficient conditions are provided for a self-selective price function to exist. It is shown that under the optimal price function tasks are assigned in such a way that workers' effort is increasing in workers' quality. It is not necessarily true, however, that the price function must be increasing in workers' quality. The extension of the model to a dynamic context and the requirements of a credible pre-commitment available to the screener are discussed.
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