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Task Shifts vs. Termination as Devices for Eliciting Optimal Effort Supply

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  • Pier Angelo Mori

Abstract

This paper contrasts assignments to punitive tasks and terminations as alternative incentive devices. The basic question we ask here is: does the threat of assigning employees to a punitive task allow one to attain higher effort levels than termination threats? The answer critically depends on whether employers are able or not to commit themselves not to fire. We show that in the no‐commitment case the only relevant incentive device is termination threats. In contrast, when employers commit themselves not to fire, by threatening punitive task reassignments there obtain effort levels that are not implementable by termination. The implementation results are then applied to the study of incentive problems arising when investment infirm‐specific human capital is unverifiable.

Suggested Citation

  • Pier Angelo Mori, 1998. "Task Shifts vs. Termination as Devices for Eliciting Optimal Effort Supply," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 33-65, March.
    • Handle: RePEc:bla:jemstr:v:7:y:1998:i:1:p:33-65
    DOI: 10.1111/j.1430-9134.1998.00033.x
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    References listed on IDEAS

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    Cited by:

    1. Illoong Kwon, 2005. "Threat of Dismissal: Incentive or Sorting?," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 797-838, October.
    2. Illoong Kwon, 2006. "Optimal Contracts for Long‐Term Decisions and the Threat of Dismissal," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(3), pages 735-761, September.
    3. Mori, Pier Angelo, 1998. "Promotion careers with multiple punitive assignments," Economics Letters, Elsevier, vol. 60(3), pages 369-373, September.

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