A model of hysteresis arising from social interaction within a firm

Rios, Luis A. and Rachinskii, Dmitrii and Cross, Rod (2017) A model of hysteresis arising from social interaction within a firm. Journal of Physics: Conference Series, 811 (1). 012011. ISSN 1742-6588

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    Abstract

    This paper subscribes to the view that a key distinguishing feature of a firm is its social nature. We present a model in which hysteresis arises from the social interactions between employees. Employees have a simple response to incentives in the form of the pay available outside the firm relative to that available within the firm. Allowing for social interaction, whereby employees are influenced by the effort levels of fellow employees, leads to the distinctive effects, such as lazy relay responses to incentives, associated with hysteresis.