Advanced Search
MyIDEAS: Login to save this paper or follow this series

Inducing Good Behavior: Bonuses versus Fines in Inspection Games

Contents:

Author Info

  • Daniele Nosenzo

    (School of Economics, University of Nottingham)

  • Theo Offerman

    (CREED, Department of Economics, University of Amsterdam)

  • Martin Sefton

    (School of Economics, University of Nottingham)

  • Ailko van der Veen

    (CREED, Department of Economics, University of Amsterdam)

Abstract

We examine the effectiveness of bonuses and fines in an ‘inspection game’ where an employer can learn the effort of a worker through costly inspection. Standard game theoretic analysis predicts that fines discourage shirking, whereas bonuses encourage shirking. In contrast, ownpayoff effects suggest that both fines and bonuses discourage shirking. In an experiment we find that fines are more effective than bonuses in reducing shirking. However, we do not find that bonuses encourage shirking. Behavioral theories based on Impulse Balance Equilibrium or Quantal Response Equilibrium provide a good account of deviations from Nash equilibrium predictions.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nottingham.ac.uk/cedex/documents/papers/2010-21.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2010-21.

as in new window
Length:
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:cdx:dpaper:2010-21

Contact details of provider:
Postal: University Park, Nottingham NG7 2RD
Phone: +44 (0) 115 951 5620
Fax: +44 (0) 115 951 4159
Web page: http://www.nottingham.ac.uk/economics/cedex/
More information through EDIRC

Related research

Keywords: Inspection Games; Costly Monitoring; Rewards and Punishments; Bonuses and Fines; Quantal Response Equilibrium; Impulse Balance Equilibrium; Experiment;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. David Dickinson, 2001. "The Carrot vs. the Stick in Work Team Motivation," Experimental Economics, Springer, vol. 4(1), pages 107-124, June.
  2. Jacob K. Goeree & Charles A. Holt, 2000. "Ten Little Treasures of Game Theory and Ten Intuitive Contradictions," Virginia Economics Online Papers 333, University of Virginia, Department of Economics.
  3. Offerman, Theo, 2002. "Hurting hurts more than helping helps," European Economic Review, Elsevier, vol. 46(8), pages 1423-1437, September.
  4. James Andreoni & William Harbaugh & Lise Vesterlund, 2003. "The Carrot or the Stick: Rewards, Punishments, and Cooperation," American Economic Review, American Economic Association, vol. 93(3), pages 893-902, June.
  5. Charness, Gary & Rabin, Matthew, 2001. "Understanding Social Preferences with Simple Tests," Department of Economics, Working Paper Series qt4qz9k8vg, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  6. Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
  7. Abbink, Klaus & Bernd Irlenbusch & Elke Renner, 1997. "The Moonlighting Game - An Experimental Study on Reciprocity and Retribution," Discussion Paper Serie B 415, University of Bonn, Germany.
  8. Potters, J.J.M. & Winden, F.A.A.M. van, 1996. "Comparative statics of a signaling game: An experimental study," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73374, Tilburg University.
  9. Martin Sefton & Robert Shupp & James M. Walker, 2006. "The Effect of Rewards and Sanctions in Provision of Public Goods," Caepr Working Papers 2006-005, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington, revised Aug 2006.
  10. Reinhard Selten & Thorsten Chmura, 2008. "Stationary Concepts for Experimental 2x2-Games," American Economic Review, American Economic Association, vol. 98(3), pages 938-66, June.
  11. Rand, David Gertler & Dreber, Anna & Fudenberg, Drew & Ellingson, Tore & Nowak, Martin A., 2009. "Positive Interactions Promote Public Cooperation," Scholarly Articles 3804483, Harvard University Department of Economics.
  12. Ochs Jack, 1995. "Games with Unique, Mixed Strategy Equilibria: An Experimental Study," Games and Economic Behavior, Elsevier, vol. 10(1), pages 202-217, July.
  13. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
  14. Reinhard Selten & Thorsten Chmura & Sebastian J. Goerg, 2011. "Stationary Concepts for Experimental 2 X 2 Games: Reply," American Economic Review, American Economic Association, vol. 101(2), pages 1041-44, April.
  15. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Incentives doublethink
    by chris dillow in Stumbling and Mumbling on 2012-02-28 14:49:53
  2. Bonuses vs fines
    by chris dillow in Stumbling and Mumbling on 2011-01-27 16:22:45
  3. Bonuses, institutions, culture
    by chris dillow in Stumbling and Mumbling on 2013-03-05 13:59:21

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cdx:dpaper:2010-21. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alex Possajennikov).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.