An uncertain price discrimination model in labor market

This paper investigates an uncertain price discrimination problem in labor market, in which the employee’s capability is his/her private information and characterized as an uncertain variable. To maximize the employer’s welfare, an uncertain price discrimination model in labor market is established. Moreover, a crisp equivalent form of the model is given, and the analytic solution is therefore obtained by employing variational method. This optimal solution shows that both the productivity and the wage are increasing with respect to the employee’s capability.