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Ananish Chaudhuri, Tony So and Erwann Sbai
''Pay cuts and layoffs in an experimental minimum effort coordination game''
( 2017, Vol. 37 No.3 )
It is well-documented that during recessions, businesses prefer to lay off workers rather than implement across the board pay cuts. We examine the impact of pay cuts versus layoffs on intra-organization coordination, which is a fundamental problem facing firms involved in team production, by looking at behavior in the minimum effort coordination game following an intervention. Our results suggest that, contrary to received wisdom, both pay cuts and layoffs foster better coordination success. In particular, we do not find that pay cuts are detrimental to intra-organization coordination.
Keywords: Pay cuts; Layoffs; Weak-link games; Coordination; Experiments
JEL: C9 - Design of Experiments: General
L2 - Firm Objectives, Organization, and Behavior: General
Manuscript Received : Jan 19 2017 Manuscript Accepted : Sep 27 2017

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