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Bonus Payments and Reference Point Violations

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Author Info

  • Ockenfels, Axel

    ()
    (University of Cologne)

  • Sliwka, Dirk

    ()
    (University of Cologne)

  • Werner, Peter

    ()
    (University of Cologne)

Abstract

We investigate how bonus payments affect satisfaction and performance of managers in a large, multinational company. We find that falling behind a naturally occurring reference point for bonus comparisons reduces satisfaction and subsequent performance. The effects tend to be mitigated if information about one's relative standing towards the reference point is withheld.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4795.

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Length: 31 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4795

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Keywords: reference points; incentives; bonus payments; job satisfaction; job performance;

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References

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Citations

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Cited by:
  1. Greiner, Ben & Ockenfels, Axel & Werner, Peter, 2011. "Wage transparency and performance: A real-effort experiment," Economics Letters, Elsevier, Elsevier, vol. 111(3), pages 236-238, June.
  2. Björn Bartling & Leif Brandes & Daniel Schunk, 2012. "Expectations as reference points: field evidence from experienced subjects in a competitive, high-stakes environment," ECON - Working Papers, Department of Economics - University of Zurich 073, Department of Economics - University of Zurich.
  3. Werner, Peter & Bolton, Gary & Ockenfels, Axel, 2013. "How managerial wage transparency may reduce shareholder returns Evidence from an experiment," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79766, Verein für Socialpolitik / German Economic Association.
  4. Heinemann, Friedrich & Hennighausen, Tanja & Moessinger, Marc-Daniel, 2011. "Intrinsic work motivation and pension reform acceptance," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 11-045, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Ben Greiner & Axel Ockenfels & Peter Werner, 2007. "The Dynamic Interplay of Inequality and Trust - An Experimental Study," Harvard Business School Working Papers, Harvard Business School 08-026, Harvard Business School.
  6. K. Sommerfeld, 2013. "Higher and higher? Performance pay and wage inequality in Germany," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 45(30), pages 4236-4247, October.
  7. Gary E. Bolton & Axel Ockenfels, 2010. "Betrayal Aversion: Evidence from Brazil, China, Oman, Switzerland, Turkey, and the United States: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 100(1), pages 628-33, March.
  8. Kampkötter, Patrick & Sliwka, Dirk, 2011. "Differentiation and Performance: An Empirical Investigation on the Incentive Effects of Bonus Plans," IZA Discussion Papers 6070, Institute for the Study of Labor (IZA).
  9. Ghazala Azmat & Nagore Iriberri, 2010. "The provision of relative performance feedback information: An experimental analysis of performance and happiness," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1216, Department of Economics and Business, Universitat Pompeu Fabra.
  10. Astrid Gamba & Elena Manzoni, 2014. "Social comparison and risk taking behavior," Working Papers, University of Milano-Bicocca, Department of Economics 266, University of Milano-Bicocca, Department of Economics, revised Jan 2014.
  11. Grund, Christian & Martin, Johannes, 2012. "Monetary Reference Points of Managers: An Empirical Investigation of Status Quo Preferences and Social Comparisons," IZA Discussion Papers 7097, Institute for the Study of Labor (IZA).

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