When is the implicit and explicit incentives substitutes and when complements?
Substitutes when: normally the manager is ready to bear the risk of being fired (in case he performs poorly) but he wants a high salary presently for his job. so his explicit incentives are high and implicit incentives are low. hence substitues. Complements: if the markets are going through a very low phase and there’s lots of firing going all around, people are willing to work at low rates and even facing the risk of being fired (with no job security so to speak) … hence both low explicit and low implicit (complements)
I am confused, because it seems to me that in the first example (substitutes) the implicit incentive is high. If there is a high risk of being fired this seems like an incentive to do a good job.
Similarly in the complements example, I understand that the explicit incentives are low if bonuses/stock options reduced, by doesn’t a higher risk of being fire increase the implicit incentives?