Sales Maximation and Specific Human Capital
Volume: Volume 29, No. 4
Issue: Winter 1998
Pages: pp. 790-802
Authors: Jan Zabojnik
Title: Sales Maximation and Specific Human Capital
Abstract: Profit-maximizing owners of firms may find it optimal to provide managers with incentives to maximize sales in addition to profits. This influences the outcome of the bargaining game between workers and managers over workers' wages and helps to solve the problem of underinvestment by workers in specific human capital. Iinvestigate optimal managerial contracts from this point of view and show that the optimal contract is a function of sales in addition to profits.
JEL Classification
Business Objectives of the Firm (L210)
Asymmetric and Private Information (D820)
Human Capital Formation in school, formal training programs, on the job; Occupational Choice; Labor Productivity
(J240)
Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets other contracts
(J410)
Personnel Management; executive compensation (M120)
Market Structure: Industrial Organization and Corporate Strategy
(6110)
Goals and Objectives of Firms (5140)
Business Administration
(5131)
Labor Economics: Theory and Empirical Studies Illustrating Theory
(8210)
Occupation (8120)
Productivity Studies: Labor, Capital, and Total Factor (8250)
Human Capital; Value of Human Life (8510)
Manpower Training and Development (8110)
Theory of Uncertainty and Information (0261)