Employee's Total Payoff from Shirking

An employee earns a weekly wage of $800. If this employee decides not to exert effort, they estimate they can avoid detection for 5 weeks before being dismissed. After dismissal, their weekly income from alternative sources would be $200. Assuming a total time horizon of 12 weeks from the moment the employee starts shirking, what is the employee's total expected monetary payoff over this 12-week period?

Comparative Analysis of Shirking Payoffs

Deconstructing the Payoff from Shirking

An employee earns a weekly wage and is considering not exerting effort. They estimate they will remain undetected for a certain number of weeks (s) before being dismissed, after which they will receive a lower weekly income for the remainder of a total time horizon (h). According to the standard model for this situation, an increase in the weekly income received after dismissal would decrease the employee's total expected monetary payoff from choosing not to exert effort.

Evaluating the Impact of Unemployment Benefits on Work Incentives

An employee earns a set weekly wage and has an alternative weekly income they could earn if they were to lose their current job. The employee is considering not exerting effort and estimates they can go undetected for a certain number of weeks before being dismissed. The employee's total expected monetary benefit from this course of action is calculated over a fixed total time horizon. If the employer improves its employee supervision methods, making it easier to detect a lack of effort, which component of the employee's total expected benefit calculation is most directly affected?

Calculating the Expected Undetected Period

An employee earns a weekly wage of $1,000. They believe they can avoid exerting effort for 4 weeks before being dismissed. Over a total time horizon of 15 weeks, their total expected monetary benefit from this strategy is calculated to be $5,100. For the 11 weeks after dismissal, their weekly income from other sources must be $____.

An employee is calculating their total potential monetary benefit from not exerting full effort over a specific time horizon. This calculation considers their current wage, the expected duration before this behavior is detected, and the income they would receive after dismissal for the remainder of the time horizon. Match each change in circumstance to its most likely direct effect on this calculated benefit.

Designing an Anti-Shirking Policy

Employee's Total Payoff from Working

Employee's Total Payoff from Shirking

Explaining a Persistent Wage Gap

A worker's decision to exert effort depends on comparing the short-term benefits of shirking with the long-term value of their job. A key factor in this calculation is the worker's 'planning horizon'—the total time they consider when evaluating their employment. In which of these situations is the worker's incentive to shirk increased specifically because their planning horizon has shortened?

Comparing Worker Incentives

In a model where workers decide between exerting effort and shirking, a decrease in the worker's planning horizon (the total period they consider for their employment) will, all else being equal, increase the relative attractiveness of shirking.

Evaluating the Planning Horizon in Employment Models

In models of worker effort, the total time period an employee considers when weighing the long-term benefits of keeping their job against the short-term gains from not working hard is known as the worker's ____.

A worker's 'planning horizon' is the total time period they consider when comparing the long-term value of keeping their job against the short-term benefits of not exerting effort. Match each worker scenario to the description that best characterizes their planning horizon in that situation.

A factory worker, who previously expected to work at their job indefinitely, learns that the factory will be permanently closing in 10 weeks. Arrange the following steps to show the logical sequence of how this new information affects the worker's decision-making about exerting effort.

Analyzing the Impact of Corporate Restructuring on Worker Effort

In a model where an employee weighs the long-term benefit of keeping their job against the short-term gain of not exerting effort, which of the following scenarios represents a direct change to the employee's 'planning horizon'?

In a model where workers decide between exerting effort and shirking, a decrease in the worker's planning horizon (the total period they consider for their employment) will, all else being equal, increase the relative attractiveness of shirking.