The recent literature on employment contracts emphasizes that it is in the interests of the parties to produce institutional arrangements that lead to employment contracts that we have termed "strongly efficient." Strong efficiencyimplies that employment is set so as to equate the marginal revenue product of workers to their alternative wage. It follows that employment in such contracts fluctuates with the determinants of a worker's marginal revenue product and with the worker's alternative wage, but not with the observed contract wage. We have examined two kinds of evidence to test the strong efficiency hypothesis. Laboratory experiments by Siegel et al. indicate that this hypothesis is strongly confirmed when the bargaining parties are required to agree on price and quantity simultaneously and is strongly rejected when the parties are required to bargain by a system of price leadership. In our field data on the printing trades, we find no convincing evidence of strong efficiency. We have also examined the evidence in support of what we have called the "weak efficiency hypothesis." According to this hypothesis, both the contract wage and the alternative wage determine employment. We have found only mixed support for this hypothesis because our measures of the alternative wage available to workers are frequently positively related to employment, precisely the contrary to the hypothesized direction of this effect in a weakly efficient contract.

The recent literature on employment contracts emphasizes that it is in the interests of the parties to produce institutional arrangements that lead to employment contracts that we have termed "strongly efficient." Strong efficiencyimplies that employment is set so as to equate the marginal revenue product of workers to their alternative wage. It follows that employment in such contracts fluctuates with the determinants of a worker's marginal revenue product and with the worker's alternative wage, but not with the observed contract wage. We have examined two kinds of evidence to test the strong efficiency hypothesis. Laboratory experiments by Siegel et al. indicate that this hypothesis is strongly confirmed when the bargaining parties are required to agree on price and quantity simultaneously and is strongly rejected when the parties are required to bargain by a system of price leadership. In our field data on the printing trades, we find no convincing evidence of strong efficiency. We have also examined the evidence in support of what we have called the "weak efficiency hypothesis." According to this hypothesis, both the contract wage and the alternative wage determine employment. We have found only mixed support for this hypothesis because our measures of the alternative wage available to workers are frequently positively related to employment, precisely the contrary to the hypothesized direction of this effect in a weakly efficient contract.

This paper investigates the extent and patterns of compliance with the federal minimum wage. Using a profit-maximizing model of compliance, predictions about compliance with weak or random government enforcement are made. Such enforcement is not random, however, and our measures of compliance suggest that government enforcement, while not inducing anything near complete compliance, does have an impact. Overall compliance in 1973 is estimated to be about 65 percent, while it is about 10 percentage points lower after the new minimum was established in 1975. Compliance appears highest among regional/racial/sex (but not age) groups where market incentives for violation are strongest.

This paper investigates the extent and patterns of compliance with the federal minimum wage. Using a profit-maximizing model of compliance, predictions about compliance with weak or random government enforcement are made. Such enforcement is not random, however, and our measures of compliance suggest that government enforcement, while not inducing anything near complete compliance, does have an impact. Overall compliance in 1973 is estimated to be about 65 percent, while it is about 10 percentage points lower after the new minimum was established in 1975. Compliance appears highest among regional/racial/sex (but not age) groups where market incentives for violation are strongest.

Based on 2016–20 hourly wage rates of McDonald’s basic crew and Big Mac prices collected simultaneously from almost all US McDonald’s, we find that in 25% of instances of minimum wage increases, restaurants keep constant their wage premium above the increasing minimum wage. Higher minimum wages are not associated with faster adoption of touch-screen ordering, and there is near-full price pass-through of minimum wages. Minimum wage hikes lead to increases in real wages (expressed as how many Big Macs 1 hour of basic crew work can buy) that are one-fifth lower than the corresponding increases in nominal wages.

This paper contains a review of the burgeoning research that has been designed to shed light on how the art auction system actually works and what it indicates about price formation.First, we find that in recent years returns on art assets appear to be little different from returns on other assets.In addition, some researchers have found that because of the weak correlation between art asset returns with other returns, there may be a case for the inclusion of art assets in a diversified portfolio.Second, we find evidence of several anomalies in art market pricing.The evidence clearly suggests that, contrary to the view of the art trade, "masterpieces" underperfo rm the market.In addition, there is considerable evidence that there are fairly long periods in which art prices may diverge across geographic areas and even auction houses.Third, we review the public record of the criminal trial of Sotheby's former Chairman, who was accused of price fixing, to show how the collusion with Christie's, the other great public auction house, was actually engineered.Contrary to the way the proceeds from the settlement of the civil suit in this case were distributed, we sho w that buyers were almost certainly not injured by the collusion, but that sellers were.In addition, based on the public record of settlement, it appears that the plaintiffs in the civil suit were very handsomely repaid for their injury.Finally, we review the extensive research on the effects of the auction institution on price formation.There is now considerable theoretical research on strategic behavior in auctions, much of it in response to empirical findings, and we review three key findings.First, the evidence suggests that art experts provide extremely accurate predictions of market prices, but that these predictions do not optimally process the publicly available information.Second, high reserve prices, and the resulting high unsold ("buy-in") rates are best explained as optimal search in the face of stochastic demand.Third, extensive research has documented that the prices of identical objects are more likely to decline than to increase when multiple units are sold, and this has led to considerable theoretical research.Subsequent empirical research has tended to document declining demand prices even when the objects are imperfect substitutes.

This paper contains a review of the burgeoning research that has been designed to shed light on how the art auction system actually works and what it indicates about price formation. First, we find that in recent years returns on art assets appear to be little different from returns on other assets. In addition, some researchers have found that because of the weak correlation between art asset returns with other returns, there may be a case for the inclusion of art assets in a diversified portfolio. Second, we find evidence of several anomalies in art market pricing. The evidence clearly suggests that, contrary to the view of the art trade, masterpieces underperform the market. In addition, there is considerable evidence that there are fairly long periods in which art prices may diverge across geographic areas and even auction houses. Third, we review the public record of the criminal trial of Sotheby`s former Chairman, who was accused of price fixing, to show how the collusion with Christie`s, the other great public auction house, was actually engineered. Contrary to the way the proceeds from the settlement of the civil suit in this case were distributed, we show that buyers were almost certainly not injured by the collusion, but that sellers were. In addition, based on the public record of settlement, it appears that the plaintiffs in the civil suit were very handsomely repaid for their injury. Finally, we review the extensive research on the effects of the auction institution on price formation. There is now considerable theoretical research on strategic behavior in auctions, much of it in response to empirical findings, and we review three key findings. First, the evidence suggests that art experts provide extremely accurate predictions of market prices, but that these predictions do not optimally process the publicly available information. Second, high reserve prices, and the resulting high unsold (buy-in) rates are best explained as optimal search in the face of stochastic demand. Third, extensive research has documented that the prices of identical objects are more likely to decline than to increase when multiple units are sold, and this has led to considerable theoretical research. Subsequent empirical research has tended to document declining demand prices even when the objects are imperfect substitutes.