A ‘threat’ is a ‘Threat’: Incentive effects of firing threats with varying degrees of performance information

Brandts, Jordi, Corgnet, Brice, Hernán-González, Roberto, Ortiz Gomez, Jose Maria and Sola Belda, Carles (2018) A ‘threat’ is a ‘Threat’: Incentive effects of firing threats with varying degrees of performance information. Working Paper. Barcelona GSE Working Paper Series.

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Abstract

We study the incentive effect of firing threats when bosses have limited information about workers. We show that a minimal amount of individual information about workers’ effort such as the time spent at their work station is sufficient to ensure strong incentive effects. This supports the use of firing threats based on rudimentary yet uncontroversial measures of work performance such as absenteeism, in organizational settings in which only limited information about workers is available. Our results help understand the limited link between pay and performance observed in compensation contracts calling for an extension of the principal-agent model to take into account how workers (mis-)perceive the intensity of incentives.

Item Type: Monograph (Working Paper)
Additional Information: Barcelona GSE Working Paper: 1023, February 2018
Research Areas: A. > Business School > Economics
Item ID: 25864
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Depositing User: Jose Maria Ortiz Gomez
Date Deposited: 19 Dec 2018 09:47
Last Modified: 08 Apr 2019 09:20
URI: https://eprints.mdx.ac.uk/id/eprint/25864

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