We study the effect of firing threats in a virtual workplace that reproduces features of existing organizations. We show that organizations in which bosses can fire up to one third of their workforce produce twice as much as organizations for which firing is not possible. Firing threats sharply decrease on-the-job leisure. Nevertheless, organizations endowed with firing threats underperformed those using individual incentives. In the presence of firing threats, employees engage in impression management activities to be seen as hard-working individuals in line with our model. Finally, production levels dropped substantially when the threat of being fired was removed, whereas on-the-job leisure surged.
Corgnet, B., Hernán-González, R., Rassenti, S., 2015. Firing threats: Incentive effects and impression management. Games and Economic Behavior 91, 97–113. doi:10.1016/j.geb.2015.02.015
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NOTICE: this is the author’s version of a work that was accepted for publication in Games and Economic Behavior. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Games and Economic Behavior, volume and issue TBA (2015). DOI: 10.1016/j.geb.2015.02.015
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