The firm as the locus of social comparisons: Standard promotion practices versus up-or-out

Auriol, Emmanuelle; Friebel, Guido; von Bieberstein, Frauke (2016). The firm as the locus of social comparisons: Standard promotion practices versus up-or-out. Journal of Economic Behavior & Organization, 121, pp. 41-59. Elsevier 10.1016/j.jebo.2015.09.005

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We suggest a parsimonious dynamic agency model in which workers have status concerns. A firm is a promotion hierarchy in which a worker's status depends on past performance. We investigate the optimality of two types of promotion hierarchies: (i) standard promotion practices, where agents have a job guarantee, and (ii) “up-or-out”, in which agents are fired when unsuccessful. We show that up-or-out is optimal if success is difficult to achieve. When success is less hard to achieve, standard promotion practices are optimal provided the payoffs associated with success are moderate. Otherwise, up-or-out is, again, optimal.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Business Management > Institute of Organization and Human Resource Management > Organisation

UniBE Contributor:

Friebel, Guido and von Bieberstein, Frauke

Subjects:

600 Technology > 650 Management & public relations
300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

01672681

Publisher:

Elsevier

Language:

English

Submitter:

Claudia Probst

Date Deposited:

05 Jan 2017 15:57

Last Modified:

05 Jan 2017 15:57

Publisher DOI:

10.1016/j.jebo.2015.09.005

BORIS DOI:

10.7892/boris.91272

URI:

https://boris.unibe.ch/id/eprint/91272

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