Team Production Benefits from a Permanent Fear of Exclusion

Tinbergen Institute Discussion Paper 15-067/VII

37 Pages Posted: 31 May 2015

See all articles by Anita Kopányi-Peuker

Anita Kopányi-Peuker

Radboud University Nijmegen - Department of Economics

T. J. S. Offerman

University of Amsterdam - Faculty of Economics and Business (FEB); Tinbergen Institute

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB); Tinbergen Institute

Date Written: May 27, 2015

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.

Keywords: team-production, weakest-link game, exclusion, probation, experiment

JEL Classification: C72, C92, M51, M55

Suggested Citation

Kopányi-Peuker, Anita and Offerman, T. J. S. and Sloof, Randolph, Team Production Benefits from a Permanent Fear of Exclusion (May 27, 2015). Tinbergen Institute Discussion Paper 15-067/VII, Available at SSRN: https://ssrn.com/abstract=2611978 or http://dx.doi.org/10.2139/ssrn.2611978

Anita Kopányi-Peuker (Contact Author)

Radboud University Nijmegen - Department of Economics ( email )

Nijmegen, 6500 HK
Netherlands

T. J. S. Offerman

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Randolph Sloof

University of Amsterdam - Faculty of Economics & Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+31 20 525 5241 (Phone)
+31 20 525 4310 (Fax)

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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