Downsizing the Labor Force by Low and High Proïfit Firms - An Experimental Analysis1
AbstractOne may hope to capture the behavioral and emotional effects of downsizing the labor force in rather abstract settings as an ultimatum game (see Fischer et al. (2008)), or try to explore downsizing in its more natural principal-agent scenario with a labor market background. We pursue the latter approach and test experimentally whether downsizing occurs whenever (game) theoretically predicted and whether effort reactions question its proïfitability. Our main findings are that downsizing seems to happen less often than predicted and that its frequency does not depend on whether, theoretically, its gains are rather large or small. Interestingly, we also find strong evidence that piece-rate offers are used in a suboptimal way.
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Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2008-087.
Date of creation: 12 Nov 2008
Date of revision:
downsizing; experimental economics; principal-agent model; labor economics;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-CBE-2008-11-25 (Cognitive & Behavioural Economics)
- NEP-EXP-2008-11-25 (Experimental Economics)
- NEP-LAB-2008-11-25 (Labour Economics)
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