Browsing by Author "Lin, Chung-Cheng"

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Reciprocity and downward wage rigidity
(2010-12-01)
Lin, Chung-Cheng
;
Yang, C. C.
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經營管理研究所
;
Institute of Business and Management
The employment relationship is to a large extent characterized by incomplete contracts, in which workers have a considerable degree of discretion over the choice of their work effort. This discretion at work kicks in the potential importance of "gift exchange" or reciprocity between workers and employers in their employment relationship. Built on the seminal work of Akerlof (1980), this paper adopts a social norm approach to model reciprocity in labor markets and theoretically derives two versions of downward wage rigidity. The first version explains why employers may adopt a high wage policy far above the competitive level. This version is not a novel finding in the existing literature and is mainly served as a benchmark for later comparison in the current paper. Our main contribution lies in the second version in which not only may employers adopt a high wage policy far above the competitive level, but one can also account for the asymmetric behavior of wages and explain why employers are hesitant about wage cuts in the presence of negative shocks. We argue that this second and stronger version of downward wage rigidity has moved the efficiency wage theory a step forward. (C) 2010 Elsevier Inc. All rights reserved.
The role of diminishing marginal utility in the ordinal and cardinal utility theories
(2019-09-01)
Lin, Chung-Cheng
;
Peng, Shi-Shu
;
經營管理研究所
;
Institute of Business and Management
We illustrate the role of the law of diminishing marginal utility in the two main modern utility theories, the ordinal and cardinal utility theories, using a generalised total utility function. In short, the ordinal utility theory, in which utility is immeasurable, must abandon the law of diminishing marginal utility; the cardinal utility theory, although able to retain this law, suffers from keeping the unrealistic view of utility measurability, which Samuelson criticises as "infinitely improbable." A new utility theory with the advantages of the two mentioned theories (i.e. the notions of both diminishing marginal utility and utility immeasurability) but without the disadvantages (i.e. the law of diminishing marginal utility is excluded and utility is measurable) therefore still seems to be a Holy Grail deserving search and development by economists.