Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87527
Authors: 
Dur, Robert
Schmittdiel, Heiner
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-174/VII
Abstract: 
Inspired by a recent observation about an online retail company, this paper explains why a firm may find it optimal to offer an exit bonus to recent hires so as to induce self-selection. We study a double adverse selection problem, in which the principal can neither observe agents’ commitment to the job nor their intrinsic motivation. A steep wage-tenure profile deters uncommitted agents from applying. An exit bonus can stimulate that –among the committed agents– those who discovered that they are not intrinsically motivated for the job discontinue employment with the principal. Our key findings are that offering an exit bonus increases profits when the first adverse selection problem is sufficiently severe compared to the second and that the exit bonus needs to come as a surprise for the agents in order to function well.
Subjects: 
intrinsic motivation
commitment
self-selection
wage compensation
exit bonus
transparency
JEL: 
J31
J33
M52
M55
Document Type: 
Working Paper

Files in This Item:
File
Size
183.8 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.