Incentives and Group Identity
AbstractThis paper investigates in a principal-agent environment whether and how group membership influences the effectiveness of incentives and when incentives can have “hidden costs”, i.e., a detrimental effect. We show experimentally that in all interactions control mechanisms can have hidden costs for reasons specific to group membership. In within-group interactions control has detrimental effects because the agent does not expect to be controlled and reacts negatively when being controlled. In between-group interactions, agents perceive control more hostile once we condition on their beliefs about principal's behavior. Our finding contributes to the micro-foundation of psychological effects of incentives.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6815.
Length: 47 pages
Date of creation: Aug 2012
Date of revision:
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Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D03 - Microeconomics - - General - - - Behavioral Economics; Underlying Principles
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-BEC-2012-09-30 (Business Economics)
- NEP-CBE-2012-09-30 (Cognitive & Behavioural Economics)
- NEP-CTA-2012-09-30 (Contract Theory & Applications)
- NEP-EVO-2012-09-30 (Evolutionary Economics)
- NEP-EXP-2012-09-30 (Experimental Economics)
- NEP-HRM-2012-09-30 (Human Capital & Human Resource Management)
- NEP-SOC-2012-09-30 (Social Norms & Social Capital)
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- Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 191-210, Fall.
- Riener, Gerhard & Wiederhold, Simon, 2012. "Team building and hidden costs of control," DICE Discussion Papers 66, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
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