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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

4 Issues per year


IMPACT FACTOR 2016: 0.252
5-year IMPACT FACTOR: 0.755

CiteScore 2016: 0.48

SCImago Journal Rank (SJR) 2016: 0.330
Source Normalized Impact per Paper (SNIP) 2016: 0.526

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ISSN
1935-1682
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Volume 3, Issue 1 (Jun 2003)

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Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

Pouring Money Down the Drain? How Sunk Investments and Signing Bonuses can Improve Employee Incentives

Anil Arya / Hans Frimor / Brian Mittendorf
Published Online: 2003-06-13 | DOI: https://doi.org/10.2202/1538-0653.1138

Abstract

A common explanation for why firms incur sunk costs is that technology considerations make them inescapable. This paper shows that sometimes firms may prefer to make early (less informed) investment decisions even when technology allows such decisions to be delayed. Sunk costs commit and clarify a firm's future course of action to prospective employees, thereby providing them with incentives to acquire firm-specific human capital. This benefit of sunk costs may also provide justification for offering employee signing bonuses.

Keywords: sunk investments; incentives; hold-up problem

About the article

Published Online: 2003-06-13


Citation Information: Topics in Economic Analysis & Policy, ISSN (Online) 1538-0653, DOI: https://doi.org/10.2202/1538-0653.1138.

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