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The Effect of Noise in a Performance Measure on Work Motivation

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  • Randolph Sloof

    ()
    (University of Amsterdam)

  • C. Mirjam van Praag

    ()
    (University of Amsterdam)

Abstract

This paper reports the results of an individual real effort laboratory experiment where subjects are paid for measured performance. Measured performance equals actual performance plus noise. We compare a stable environment where the noise is small with a volatile environment where the noise is large. Subjects exert significantly more effort in the volatile environment than in the stable environment. This finding is in line with standard agency theory and contrasts a distinct element of expectancy theory; noisier performance measures do not lower work motivation. This discussion paper has resulted in a publication in Labour Economics , 17(5), 751-65.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 08-074/1.

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Date of creation: 14 Aug 2008
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Handle: RePEc:dgr:uvatin:20080074

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Web page: http://www.tinbergen.nl

Related research

Keywords: Performance measurement; noise; work motivation; experiments; agency theory; expectancy theory;

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References

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  1. Randolph Sloof & Mirjam van Praag, 2007. "Performance Measurement, Expectancy and Agency Theory: An Experimental Study," Tinbergen Institute Discussion Papers 05-026/1, Tinbergen Institute, revised 22 Sep 2007.
  2. Eriksson, Tor & Poulsen, Anders & Villeval, Marie Claire, 2008. "Feedback and Incentives: Experimental Evidence," IZA Discussion Papers 3440, Institute for the Study of Labor (IZA).
  3. Ernst Fehr & Lorenz Götte, 2005. "Do Workers Work More if Wages are High? Evidence from a Randomized Field Experiment," IEW - Working Papers 125, Institute for Empirical Research in Economics - University of Zurich.
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  8. Ernst Fehr & David Huffman & Lorenz Goette, 2004. "Loss Aversion And Labor Supply," Method and Hist of Econ Thought 0409003, EconWPA.
  9. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  10. Henry S. Farber, 2005. "Is Tomorrow Another Day? The Labor Supply of New York City Cabdrivers," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 46-82, February.
  11. Muriel Niederle & Lise Vesterlund, 2005. "Do Women Shy Away From Competition? Do Men Compete Too Much?," NBER Working Papers 11474, National Bureau of Economic Research, Inc.
  12. George Baker, 2002. "Distortion and Risk in Optimal Incentive Contracts," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 728-751.
  13. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  14. Camerer, Colin, et al, 1997. "Labor Supply of New York City Cabdrivers: One Day at a Time," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 407-41, May.
  15. Mrinal Ghosh & George John, 2000. "Experimental Evidence for Agency Models of Salesforce Compensation," Marketing Science, INFORMS, vol. 19(4), pages 348-365, August.
  16. Zabojnik, Jan, 1996. "Pay-performance sensitivity and production uncertainty," Economics Letters, Elsevier, vol. 53(3), pages 291-296, December.
  17. David Godes, 2004. "Contracting Under Endogenous Risk," Quantitative Marketing and Economics, Springer, vol. 2(4), pages 321-345, December.
  18. Robert Gibbons, 2005. "Incentives Between Firms (and Within)," Management Science, INFORMS, vol. 51(1), pages 2-17, January.
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