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An experimental examination of compensation schemes and level of effort in differentiated tasks

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  • Takahashi, Hiromasa
  • Shen, Junyi
  • Ogawa, Kazuhito

Abstract

We examine the influence of different compensation schemes on the exertion of effort in completing differentiated tasks. The first task is assumed to be boring and has no intrinsic motivation, while the second is assumed to be interesting and has intrinsic motivation. The results are as follows: (1) for the first task, effort levels were lower for high fixed pay than low fixed pay and no payment and were higher for low incentive pay than high incentive pay and no payment. (2) Standard economic theory holds for the second task, which predicts that the higher the incentive, the more effort an individual will exert and the greater the performance, on an average.

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  • Takahashi, Hiromasa & Shen, Junyi & Ogawa, Kazuhito, 2016. "An experimental examination of compensation schemes and level of effort in differentiated tasks," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 61(C), pages 12-19.
    • Handle: RePEc:eee:soceco:v:61:y:2016:i:c:p:12-19
    DOI: 10.1016/j.socec.2016.01.002
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    Cited by:

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    2. Havranek, Tomas & Cala, Petr & Irsova, Zuzana & Matousek, Jindrich & Novak, Jiri, 2022. "Financial Incentives and Performance: A Meta-Analysis of Economics Evidence," CEPR Discussion Papers 17680, C.E.P.R. Discussion Papers.
    3. Adrian Chadi & Mario Mechtel & Vanessa Mertins, 2022. "Smartphone bans and workplace performance," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 287-317, February.
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    5. Florian Englmaier & Stefan Grimm & Dominik Grothe & David Schindler & Simeon Schudy, 2018. "The Effect of Incentives in Non-Routine Analytical Team Tasks," CESifo Working Paper Series 6903, CESifo.
    6. Dorner, Zack & Lancsar, Emily, 2023. "Don’t pay the highly motivated too much," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 103(C).
    7. Patrick Reinwald & Stephan Leitner & Friederike Wall, 2021. "Limited intelligence and performance-based compensation: An agent-based model of the hidden action problem," Papers 2107.03764, arXiv.org.
    8. Zack Dorner & Emily Lancsar, 2017. "Intrinsic motivation, health outcomes and the crowding out effect of temporary extrinsic incentives: A lab-in-the-field experiment," Monash Economics Working Papers 18-17, Monash University, Department of Economics.
    9. Erkal, Nisvan & Gangadharan, Lata & Koh, Boon Han, 2018. "Monetary and non-monetary incentives in real-effort tournaments," European Economic Review, Elsevier, vol. 101(C), pages 528-545.
    10. Taylor, Matthew P., 2020. "Heterogeneous motivation and cognitive ability in the lab," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 85(C).

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    More about this item

    Keywords

    Real effort experiment; Intrinsic motivation; Loss aversion; Fixed pay; Incentive pay;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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