Employment relationships in knowledge-based firms: who should have power?

This paper investigates the relationship between an employer and a knowledge worker when an arrangement is set ex-ante to affect the relative bargaining position in the ex-post negotiation. Specifically, we study what drives the employer's decision to endow the worker with the rights to control the deployment of valuable resources when this choice affects the worker's bargaining power in the negotiation. Our analysis highlights how different informational asymmetries impact on the employer's problem of designing the employment contract to be offered to the worker.