This paper examines the provision of industrial safety in a competitive labor market under the assumption that it takes time for workers to learn about changes in safety levels at a firm. It is shown that safety will in general be underprovided and that in some cases government-enforced workmen's compensation can bring improvements. The results hold even though in equilibrium all workers are perfectly informed about the level of safety prevailing at each firm and each is free to move to any firm he likes.

This paper begins an investigation into the incentive problems at a firm when the effort of the employer and the employees combines to determine final output. The major conclusion is that optimal reward functions in this circumstance will in general value the performance of a worker relative to that of his peers. The paper thus joins a growing literature associated with the work of Lazear and Rosen on rank-order tournaments.

Workers paid by the piece should be happy to introduce new techniques that increase output, but firms always seem to reduce the piece rate when workers start earning too much money. Workers respond by restricting output and keeping good new ideas to themselves. We show that this outcome is inevitable in a competitive environment. However, there are noncompetitive situations where firms can use piece rates to get cooperation from their workers. These predictions are consistent with case history evidence from the cotton spinning industry in England in the nineteenth century and the Lincoln Electric Company in the United States even today.