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Payment scheme changes and effort Adjustment: The role of 2D:4D digit ratio

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  • Friedl, Andreas
  • Neyse, Levent
  • Schmidt, Ulrich

Abstract

People are usually more productive when they are paid according to their performance. Yet, it is reported that women prefer fixed rate payment over performance based payment schemes. This study experimentally investigates i) whether absolute incentives are effective without the knowledge of an alternative incentive scheme, ii) the possible role of the sexually dimorphic 2D:4D digit ratio, which is claimed to be a negative bio-marker of prenatal testosterone exposure, in effort provision. Results show that a switch from a piece rate to a fixed rate payment scheme reduces effort provision in a real effort task while switching in the other direction increases effort provision. When the piece rate is replaced with fixed payment, men and participants with lower 2D:4D show a greater decrease in effort than the rest. We do not observe any impact of gender or 2D:4D on effort adjustment behavior when fixed payment is replaced with a piece rate. Our results also contribute to the discussion on the incentive compatibility of the Slider Task.

Suggested Citation

  • Friedl, Andreas & Neyse, Levent & Schmidt, Ulrich, 2018. "Payment scheme changes and effort Adjustment: The role of 2D:4D digit ratio," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 72(C), pages 86-94.
    • Handle: RePEc:eee:soceco:v:72:y:2018:i:c:p:86-94
    DOI: 10.1016/j.socec.2017.11.007
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    1. Neyse, Levent & Vieider, Ferdinand M. & Ring, Patrick & Probst, Catharina & Kaernbach, Christian & Eimeren, Thilo van & Schmidt, Ulrich, 2020. "Risk attitudes and digit ratio (2D:4D): Evidence from prospect theory," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 60, pages 29-51.
    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.

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