In the imperfect information model, employers who provide better information about their profitability to their employees

Question

Quizplus · Accepted Answer

In the imperfect information model, strikes occur because employees are uncertain about the profitability of the firm and demand higher wages as a form of insurance against the possibility that they are being paid less than their fair share. When employers provide better information about their profitability, employees are better able to gauge the fairness of their wages and are less likely to demand higher wages through strikes. This should lead to a decrease in the frequency of strikes. Moreover, when employees have better information, they are more likely to assess the cost of a strike accurately and decide that it is not worth the cost. This should lead to a decrease in the duration of strikes. Therefore, D is the correct answer.

In the Imperfect Information Model, Employers Who Provide Better Information