ABSTRACT
This chapter examines in some detail a rational choice approach, in terms of the so-called “prisoners’ dilemma”, to one particular economic problem–the relationship between employment security and work effort, although the argument can be applied to the entire employment contract. It discusses an approach to constructing a theory linking the employment contract, through trust, to performance–that is to say, to effort. The chapter also examines rational choice analyses couched in terms of the logic of the prisoners’ dilemma game. Employers offer a package of terms and conditions of employment. In much of the writing employment security is based in law rather than voluntary agreement between employers and employees. The chapter argues that it is rather uncommon for the process generating that outcome to be suitably described in terms of the iterated prisoners’ dilemma, accompanied by the entirely calculative definition of trust used by Alan S. Miller.
