Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/282122 
Year of Publication: 
2023
Series/Report no.: 
Discussion Paper No. 430
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
Reference-dependent preferences can explain several puzzling observations about organizational change. We introduce a dynamic model in which a loss-neutral firm bargains with loss-averse workers over organizational change and wages. We show that change is often stagnant or slow for long periods followed by a sudden boost in productivity during a crisis. Moreover, it accounts for the fact that different firms in the same industry often have significant productivity differences. The model also demonstrates the importance of expectation management even if all parties have rational expectations. Social preferences explain why it may be optimal to divide a firm into separate entities.
Subjects: 
organizational change
productivity
reference points
loss aversion
social preferences
JEL: 
D23
D91
L2
Document Type: 
Working Paper

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