Arbeitspapier
Paid to quit
Inspired by a recent observation about an online retail company, this paper explains why a firm may find it optimal to offer an exit bonus to recent hires so as to induce self-selection. We study a double adverse selection problem, in which the principal can neither observe agents’ commitment to the job nor their intrinsic motivation. A steep wage-tenure profile deters uncommitted agents from applying. An exit bonus can stimulate that –among the committed agents– those who discovered that they are not intrinsically motivated for the job discontinue employment with the principal. Our key findings are that offering an exit bonus increases profits when the first adverse selection problem is sufficiently severe compared to the second and that the exit bonus needs to come as a surprise for the agents in order to function well.
- Language
-
Englisch
- Bibliographic citation
-
Series: Tinbergen Institute Discussion Paper ; No. 13-174/VII
- Classification
-
Wirtschaft
Wage Level and Structure; Wage Differentials
Compensation Packages; Payment Methods
Personnel Economics: Compensation and Compensation Methods and Their Effects
Personnel Economics: Labor Contracting Devices
- Subject
-
intrinsic motivation
commitment
self-selection
wage compensation
exit bonus
transparency
- Event
-
Geistige Schöpfung
- (who)
-
Dur, Robert
Schmittdiel, Heiner
- Event
-
Veröffentlichung
- (who)
-
Tinbergen Institute
- (where)
-
Amsterdam and Rotterdam
- (when)
-
2013
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Dur, Robert
- Schmittdiel, Heiner
- Tinbergen Institute
Time of origin
- 2013
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