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Emotions and Incentives

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  • Matthias Kräkel

Abstract

We introduce a concept of emotions that emerge when workers compare their own performance with a given standard or with the performances of co-workers. Assuming heterogeneity among the workers the interplay of emotions and incentives is analysed by focusing on three incentive schemes that are frequently used in practice: tournaments, bonuses and piece rates. We identify certain conditions under which emotions lead to additional incentives and under which the employer benefits from emotional workers. Furthermore, the concept of emotions is used to explain puzzling results from laboratory and field experiments. Finally, the results provide some insights on an employer's possible preferences in favor of heterogeneous instead of homogeneous work groups.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse14_2004.pdf
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Bibliographic Info

Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse14_2004.

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Length: 59
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:bon:bonedp:bgse14_2004

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Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

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Keywords: bonuses; emotions; incentives; piece rates; tournaments;

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References

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Citations

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Cited by:
  1. Christoph H. Loch & D. Charles Galunic & Susan Schneider, 2006. "Balancing cooperation and competition in human groups: the role of emotional algorithms and evolution," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(2-3), pages 217-233.
  2. Kräkel, Matthias, 2008. "Emotions in tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 204-214, July.

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