Template-Type: ReDIF-Paper 1.0
Title: Do Firms Know What Workes Want?
Author-Name: Simon Cordes
Author-Email: simon.cordes@uni-bonn.de
Author-Name: Max Müller
Author-Email: max.mueller@uni-bonn.de

Classification-JEL: J32, J42, J81, D2, D83
Keywords: Amenities, Behavioral Firms, Labor Shortages, Work from Home, Beliefs

Abstract: Labor supply depends on wages and amenities, and standard models implicitly assume
that firms hold accurate beliefs about workers’ amenity valuations. In a survey
with firms and workers in Germany, we measure workers’ valuations of amenities
and firms’ beliefs about workers’ valuations. We find that firms systematically underestimate
workers’ valuations of all amenities. These misperceptions are driven
by interpersonal projection: managers project their own preferences—they value
amenities less—onto workers. Through the lens of a simple model of imperfect
competition, we show that firm misperceptions result in (i) labor shortages and
(ii) excess labor costs for biased firms, and increase the market power of unbiased
firms. Empirical tests confirm these predictions: a simple calibration suggests that
non-providing firms could reduce their labor costs by 5% by providing amenities.

Note: 
Length:127
Creation-Date:2026-03
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp739
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2025_739