Fair Wages and the Co-Employment of Hired and RentedHands- An Experimental Study –

A firm with stochastic demand can rely on hired hands when demand is low and rent additionallabour when demand is higher. For high demand this implies the co-employmentof hired hands, paid directly by the firm, and of rented hands who are paid by a rentalagency. This may cause severe problems if wages differ systematically between hired andrented hands. Will rented hands accept lower wages than hired hands? Or will rentedhands demand higher wages as a compensation for flexibility? Fairness norms mightplay an important role in wage-setting decisions. We will explore theoretically and experimentallypossible fairness considerations of the involved parties.