Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93860
Authors: 
Kräkel, Matthias
Nieken, Petra
Year of Publication: 
2013
Series/Report no.: 
SFB/TR 15 Discussion Paper 425
Abstract: 
We analyze whether incentives from relative performance pay are reduced or enhanced if a department is possibly terminated due to a crisis. Our benchmark model shows that incentives decrease in a severe crisis, but are boosted given a minor crisis since efforts are strategic complements in the former case but strategic substitutes in the latter one. We tested our predictions in a laboratory experiment. The results confirm the effort ranking but show that in a severe crisis individuals deviate from equilibrium significantly stronger than in other situations. This behavior contradicts the benchmark model and leads to a five times higher survival probability of the department. We develop a new theoretical approach that may explain players' behavior.
Subjects: 
crisis
incentives
strategic complements
strategic substitutes
tournament
JEL: 
C9
J3
J6
M5
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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