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The Hidden Costs of Downsizing

  • Heinz, Matthias
  • Drzensky, Frank
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    We analyze whether a principal s decision to layoff an agent affects the performance of the surviving agents. To study the impact of the decision in isolation, we conducted an experimental principal-agent game. We find that agents reduce their performance by 37% as a response to the decision. Heterogeneity in principals decisions can largely be explained by different beliefs about how agents react to layoffs.

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    File URL: http://econstor.eu/bitstream/10419/79764/1/VfS_2013_pid_255.pdf
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    Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79764.

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    Date of creation: 2013
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    Handle: RePEc:zbw:vfsc13:79764
    Contact details of provider: Web page: http://www.socialpolitik.org/
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