Firestone Tyres and Incomplete Contracts
The Firestone case provides a clear example of an incomplete employment contract. While management could enforce formal terms like 12-hour shifts and pay cuts, they discovered the contract was incomplete as it could not guarantee the production of safe tyres. This was because it could not secure crucial, un-contractible aspects like employee effort and care from a workforce angered by the new terms. The resulting production of defective tyres shows how actions detrimental to the firm can arise from employee resentment when formal contracts cannot govern all aspects of the employment relationship.
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CORE Econ
Introduction to Microeconomics Course
Ch.6 The firm and its employees - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
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Firestone Tyres and Incomplete Contracts
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Firestone Tyres and Incomplete Contracts
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