Long-Term Employment Relationships by Credible Commitments

The Carl Zeiss Foundation

Bibliographic Data

ID5917486
AuthorsMeg Abraham (0000-0001-8081-946X, corresponding author), Martin Abraham (0000-0002-7051-6702), Bernhard Prosch
Year2000
Volume12
Issue3
Pages283-306
Publication date2000-08-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueRationality and Society (JOURNAL)
Journal identifiersISSN: 1043-4631 • E-ISSN: 1461-7358
PublisherSAGE Publications Inc (PUBLISHER)
DOI10.1177/104346300012003002
OpenAlexW2030430690
LanguageEN
Citations received7
References cited17

Carl Zeiss, a famous German firm, was among the first companies to provide employee benefits. Its sole owner, a foundation known as the Carl-Zeiss-Stiftung, promised a century ago to fulfill almost revolutionary social-welfare obligations to company workers. Can this promise be explained within a model of rational behavior? Using game theory, the relationship between employer and employee can be reconstructed as a Prisoner's Dilemma, in which both sides are interested in future cooperation but have incentives to terminate the relationship opportunistically. One possible solution is the implementation of institutionalized self-commitments; that is, a pension fund and severance pay are `hostages' that serve as incentives. Analysis indicates that the Carl-Zeiss-Stiftung can be seen as a historical example of a private-sector organization that committed itself to providing benefits to solve a basic cooperation problem. The foundation's statute provides incentives for the both employer and employees to establish a long-term employment relationship. In fact, this was exactly the intention of the founder, Ernst Abbe

Business · Dilemma · Economics · German · Incentive · Labour economics · Law and economics · Market economy · Microeconomics · Pension · Political science · Severance · Statute · Welfare · Banking stability, regulation, efficiency · Corporate Finance and Governance · Economic theories and models · Law · Finance

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