A ‘threat’ is a ‘Threat’: Incentive effects of firing threats with varying degrees of performance information

Working paper

Brandts, J., Corgnet, B., Hernán-González, R., Ortiz Gomez, J. and Sola Belda, C. 2018. A ‘threat’ is a ‘Threat’: Incentive effects of firing threats with varying degrees of performance information. Barcelona GSE Working Paper Series.
TypeWorking paper
TitleA ‘threat’ is a ‘Threat’: Incentive effects of firing threats with varying degrees of performance information
AuthorsBrandts, J., Corgnet, B., Hernán-González, R., Ortiz Gomez, J. and Sola Belda, C.
Abstract

We study the incentive effect of firing threats when bosses have limited information about workers. We show that a minimal amount of individual information about workers’ effort such as the time spent at their work station is sufficient to ensure strong incentive effects. This supports the use of firing threats based on rudimentary yet uncontroversial measures of work performance such as absenteeism, in organizational settings in which only limited information about workers is available. Our results help understand the limited link between pay and performance observed in compensation contracts calling for an extension of the principal-agent model to take into account how workers (mis-)perceive the intensity of incentives.

PublisherBarcelona GSE Working Paper Series
Publication dates
Online01 Feb 2018
Publication process dates
Deposited19 Dec 2018
Accepted01 Feb 2018
Output statusPublished
Publisher's version
Additional information

Barcelona GSE Working Paper: 1023, February 2018

Web address (URL)https://www.barcelonagse.eu/research/working-papers/threat-threat-incentive-effects-firing-threats-varying-degrees-performance
LanguageEnglish
Department nameBarcelona Graduate School of Economics
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