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Task Shifts vs. Termination as Devices for Eliciting Optimal Effort Supply
Author(s) -
Mori Pier Angelo
Publication year - 1998
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.1998.00033.x
Subject(s) - commit , punitive damages , incentive , task (project management) , investment (military) , microeconomics , ask price , capital investment , business , computer security , computer science , law and economics , economics , political science , finance , law , management , database , politics
This paper contrasts assignments to punitive tasks and terminations as alternative incentive devices. The basic question we ask here is: does the threat of assigning employees to a punitive task allow one to attain higher effort levels than termination threats? The answer critically depends on whether employers are able or not to commit themselves not to fire. We show that in the no‐commitment case the only relevant incentive device is termination threats. In contrast, when employers commit themselves not to fire, by threatening punitive task reassignments there obtain effort levels that are not implementable by termination. The implementation results are then applied to the study of incentive problems arising when investment infirm‐specific human capital is unverifiable.