The Hidden Costs of Downsizing

Matthias Heinz and Frank Drzensky

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: We analyze whether a principal s decision to layoff an agent affects the performance of the surviving agents. To study the impact of the decision in isolation, we conducted an experimental principal-agent game. We find that agents reduce their performance by 37% as a response to the decision. Heterogeneity in principals decisions can largely be explained by different beliefs about how agents react to layoffs.

JEL-codes: C91 J63 J82 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-exp and nep-hrm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79764

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