A Formal Theory of the Employment Relationship

A model was constructed that incorporates rational grounds for the choice by two individuals between an employment contract and a contract of the ordinary kind (which we have called a sales contract). By a generalization of this model one can account for the fact that in an employment contract certain aspects of the workers's behavior are stipulated in the contract terms, certain other aspects are placed within the authority of the employer, and still other aspects are left to the worker's choice. Since administrative theory was interested in explaining behavior within the framework of employment relations, and economic theory in explaining behavior within the area of market relations, the model suggests one possible way of relating these two bodies of theory. The most serious limitations of the model lie in the assumptions of rational utility-maximizing behavior incorporated in it. (Author)