| This research investigates whether the fear of exclusion improves team-production in a labor market setting. Groups of 6 workers engage in (a version of) the weakest-link game, whereas there are 3 unemployed subjects on the bench. In each group, there is a manager who does not participate in the production itself, but benefits from the output. This manager can decide to replace some of the workers with another subject from the bench. Our treatment variables are the information the manager observes about the actual effort levels of the workers (full information vs. noisy signal), and the contract length (workers can be fired every period / only once in three periods / never). Our results show that the fear of exclusion works; if firing is possible, workers choose higher effort levels than in the case when there are no firing possibilities. Furthermore, the most flexible contract induces the highest output, and the one with no firing possibility leads to the lowest one. There is no difference between the workers’ effort choices across noise and no noise settings for a fixed contract type. Furthermore, most managers apply their disciplinary device successfully in the full information case: the act of firing enhances effort levels and thus output. The device is less effective in the noise treatments. (joint work with Theo Offerman and Randolph Sloof) |
