Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2015-05-29
Number: 15-067/VII
Author-Name: Anita Kopányi-Peuker
Author-Workplace-Name: University of Amsterdam, the Netherlands
Author-Name: Theo Offerman
Author-Workplace-Name: University of Amsterdam, the Netherlands
Author-Name: Randolph Sloof
Author-Workplace-Name: University of Amsterdam, the Netherlands
Title: Team Production benefits from a Permanent Fear of Exclusion
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.
Classification-JEL: C72, C92, M51, M55
Keywords: team-production, weakest-link game, exclusion, probation, experiment
File-Url: https://papers.tinbergen.nl/15067.pdf
File-Format: application/pdf
File-Size: 904580 bytes
Handle: RePEc:tin:wpaper:20150067