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We provide an axiomatic foundation for the classical problem of
compensating workers when effort is unobserved. The employer
holds Bayesian beliefs about workers’ effort, observes output precisely
or imprecisely, and seeks fairness. We introduce axioms tailored
to this asymmetric-information environment and show that
they determine a unique closed-form reward rule, the informational
Bayesian value (IBV). The IBV can be interpreted as a
contract between an uninformed employer and workers. We then
analyze worker disappointment under this rule and show that average
disappointment is zero, whether evaluated ex-post, interim,
or ex-ante. Consequently, fair compensation prevents worker disappointment
in the long run.
