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Team Production benefits from a Permanent Fear of Exclusion

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  • Anita Kopányi-Peuker

    (University of Amsterdam, the Netherlands)

  • Theo Offerman

    (University of Amsterdam, the Netherlands)

  • Randolph Sloof

    (University of Amsterdam, the Netherlands)

Abstract

One acclaimed role of managers is to monitor workers in team production processes and discipline them through the threat of terminating them from the team (Alchian and Demsetz, 1972). We extend a standard weakest link experiment with a manager that can decide to replace some of her team members at a cost. The amount of contractual commitment (‘termination possibilities’) and the precision of the manager’s monitoring information serve as treatment variables. Our results show that the fear of exclusion has a profound effect on team performance even if workers are imperfectly monitored; the most flexible contract induces the highest output while the one with no firing possibilities leads to the lowest production. However, once the fear is eliminated for some workers, because permanent workers cannot be fired after a probation phase, effort levels steadily decrease.

Suggested Citation

  • Anita Kopányi-Peuker & Theo Offerman & Randolph Sloof, 2015. "Team Production benefits from a Permanent Fear of Exclusion," Tinbergen Institute Discussion Papers 15-067/VII, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20150067
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    Cited by:

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    2. Brandts, Jordi & Corgnet, Brice & Hernán-González, Roberto & Ortiz, José Mª & Solà, Carles, 2021. "Watching or not watching? Access to information and the incentive effects of firing threats," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 672-685.
    3. Christian Grund & Christine Harbring & Kirsten Thommes & Katja Rebecca Tilkes, 2020. "Decisions on Extending Group Membership—Evidence from a Public Good Experiment," Games, MDPI, vol. 11(4), pages 1-27, December.
    4. Levy, Jonathan, 2019. "Two strikes and you are out! An experiment on exclusion," Economics Letters, Elsevier, vol. 185(C).

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    More about this item

    Keywords

    team-production; weakest-link game; exclusion; probation; experiment;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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