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Large Stakes and Big Mistakes

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Author Info

  • Dan Ariely
  • Uri Gneezy
  • George Loewenstein
  • Nina Mazar

Abstract

Workers in a wide variety of jobs are paid based on performance, which is commonly seen as enhancing effort and productivity relative to non-contingent pay schemes. However, psychological research suggests that excessive rewards can, in some cases, result in a decline in performance. To test whether very high monetary rewards can decrease performance, we conducted a set of experiments in the U.S. and in India in which subjects worked on different tasks and received performance-contingent payments that varied in amount from small to very large relative to their typical levels of pay. With some important exceptions, very high reward levels had a detrimental effect on performance. Copyright , Wiley-Blackwell.

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File URL: http://hdl.handle.net/10.1111/j.1467-937X.2009.00534.x
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Bibliographic Info

Article provided by Oxford University Press in its journal The Review of Economic Studies.

Volume (Year): 76 (2009)
Issue (Month): 2 ()
Pages: 451-469

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Handle: RePEc:oup:restud:v:76:y:2009:i:2:p:451-469

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  1. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  2. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
  3. Camerer, Colin & Babcock, Linda & Loewenstein, George & Thaler, Richard, 1996. "Labor Supply of New York City Cab Drivers: One Day At A time," Working Papers 960, California Institute of Technology, Division of the Humanities and Social Sciences.
  4. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
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  1. Inefficient and unfair
    by chris dillow in Stumbling and Mumbling on 2012-01-21 12:53:52
  2. The bosses' pay con-trick
    by chris dillow in Stumbling and Mumbling on 2011-10-28 09:21:13
  3. How bonuses backfire
    by chris dillow in Stumbling and Mumbling on 2011-09-19 14:06:31
  4. The left & shareholder activism
    by chris dillow in Stumbling and Mumbling on 2012-05-08 13:51:01
  5. A benefit of performance pay
    by chris dillow in Stumbling and Mumbling on 2012-05-29 13:43:17
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