Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111741
Authors: 
Kopányi-Peuker, Anita
Offerman, Theo
Sloof, Randolph
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper 15-067/VII
Abstract: 
One acclaimed role of managers is to monitor workers in team production processes and discipline them through the threat of terminating them from the team (Alchian and Demsetz, 1972). We extend a standard weakest link experiment with a manager that can decide to replace some of her team members at a cost. The amount of contractual commitment (‘termination possibilities’) and the precision of the manager’s monitoring information serve as treatment variables. Our results show that the fear of exclusion has a profound effect on team performance even if workers are imperfectly monitored; the most flexible contract induces the highest output while the one with no firing possibilities leads to the lowest production. However, once the fear is eliminated for some workers, because permanent workers cannot be fired after a probation phase, effort levels steadily decrease.
Subjects: 
team-production
weakest-link game
exclusion
probation
experiment
JEL: 
C72
C92
M51
M55
Document Type: 
Working Paper

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