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Emotions and Incentives

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  • Kräkel, Matthias

    ()
    (University of Bonn)

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 analyzed 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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1270.

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Length: 59 pages
Date of creation: Aug 2004
Date of revision:
Publication status: published as 'Emotions in tournaments' in: Journal of Economic Behavior and Organization, 2008, 67 (1), 204 - 214
Handle: RePEc:iza:izadps:dp1270

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

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References

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Cited by:
  1. Kräkel, Matthias, 2008. "Emotions in tournaments," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 204-214, July.
  2. 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.

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