The employer and the employees have an incentive to commit to high wages and high effort; the problem is that each employee has an incentive to defect, since lower effort is not detectable by the employer.
One potential remedy is to align employee incentives with the firm contractually. Another potential remedy, which might go along with the first, is charismatic, pro-social leadership by an employee who is committed to high effort and whose example brings the others along in one way or another.
To put the point in terms of hard-headed game theory: To be effective, pro-social leadership from below needs not to be deterred by another employee who engaqges in low effort. A fixed commitment on the part of the leader to high effort, as opposed to one that is contingent upon what the other player does, can bring the other along if the underlying game is Trust or Leadership. If the underlying game is the PD, the egoistic other will defect; the remedy for that could be ambiguity as to what the game is (which could lead the egoist to cooperate, since the game might well not be a PD); vengefulness on the part of another employee against the defector harming the saintly co-worker, which could similarly lead the egoist to cooperate; or egoism giving way to at least a measure of shame.
Comments