Large stakes and big mistakes
AbstractMost upper-management and sales force personnel, as well as workers in many other jobs, are paid based on performance, which is widely perceived as motivating effort and enhancing productivity relative to non-contingent pay schemes. However, psychological research suggests that excessive rewards can in some cases produce supra-optimal motivation, resulting in a decline in performance. To test whether very high monetary rewards can decrease performance, we conducted a set of experiments at MIT, the University of Chicago, and rural India. Subjects in our experiment worked on different tasks and received performance-contingent payments that varied in amount from small to large relative to their typical levels of pay. With some important exceptions, we observed that high reward levels can have detrimental effects on performance.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Boston in its series Working Papers with number 05-11.
Date of creation: 2005
Date of revision:
Other versions of this item:
- NEP-ALL-2005-09-11 (All new papers)
- NEP-CBE-2005-09-11 (Cognitive & Behavioural Economics)
- NEP-CWA-2005-09-11 (Central & Western Asia)
- NEP-EXP-2005-09-11 (Experimental Economics)
- NEP-LAB-2005-09-11 (Labour Economics)
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.:
- Uri Gneezy & Aldo Rustichini, 2000.
"A fine is a price,"
Natural Field Experiments
00258, The Field Experiments Website.
- Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
- Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Inefficient and unfair
by chris dillow in Stumbling and Mumbling on 2012-01-21 12:53:52
- The bosses' pay con-trick
by chris dillow in Stumbling and Mumbling on 2011-10-28 09:21:13
- How bonuses backfire
by chris dillow in Stumbling and Mumbling on 2011-09-19 14:06:31
- The left & shareholder activism
by chris dillow in Stumbling and Mumbling on 2012-05-08 13:51:01
- A benefit of performance pay
by chris dillow in Stumbling and Mumbling on 2012-05-29 13:43:17
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