lotteries (since firms cannot screen), the difference being that high-ability workers do not enter the low-wage lotteries as their reservation wage is too high. Thus low-wage firms attract only low-ability lottery entrants, while high-wage firms attract workers of all abilities (i.e. on average they will select average workers). Thus high-wage firms are paying an efficiency wage – they pay more, and, on average, get more (see e.g. Malcolmson 1981; Stiglitz 1976; Weiss 1980). However, the assumption that firms are unable to measure effort and pay piece rates after workers are hired or to fire workers whose output is too low is quite strong. Firms may also be able to design self-selection or screening devices that induce workers to reveal their true characteristics. High wages can effectively reduce personnel turnover, promote employees to work harder, prevent employees from resigning collectively, and effectively attract more high-quality employees. If firms can assess the productivity of applicants, they will try to select the best among the applicants. A higher wage offer will attract more applicants, and in particular, more highly qualified applicants. This permits a firm to raise its hiring standard and thereby enhance the firm's productivity. Wage compression makes it profitable for firms to screen applicants under such circumstances, and selection wages may be important. Sociological models Fairness, norms, and reciprocity Standard economic models ("neoclassical economics") assume that people pursue only their own self-interest and do not care about "social" goals ("homo economicus"). Neoclassical economics is divided into three theories, namely methodological individualism, methodological instrumentalism and methodological equilibration. Some attention has been paid to the idea that people may be altruistic (care about the well-being of others), but it is only with the addition of reciprocity and norms of fairness that the model becomes accurate.(e.g. Rabin 1993; Dufwenberg and Kirchsteiger 2000; Fehr and Schmidt 2000). Thus of crucial importance is the idea of exchange: a person who is altruistic towards another expects the other to fulfil some kind of fairness norm, be it reciprocating in kind, in some other but – according to some shared standard – equivalent way; or simply by being grateful. If the expected reciprocation is not forthcoming, the altruism is unlikely to be repeated or continued. In addition, similar norms of fairness will typically lead people into negative forms of reciprocity too – in the form of retaliation for acts perceived as vindictive. This can bind actors into vicious