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Hidden Benefits of Reward: A Field Experiment on Motivation and Monetary Incentives

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  • Kvaløy, Ola
  • Nieken, Petra
  • Schöttner, Anja

Abstract

We conducted a field experiment in a controlled work environment to investigate the effect of motivational talk and its interaction with monetary incentives. We find that motivational talk significantly improves performance only when accompanied by performance pay. Moreover, performance pay slightly reduces performance unless it is accompanied by motivational talk. These effects also carry over to the quality of work. Performance pay alone leads to more mistakes. Adding motivational talk makes the difference. In treatments with performance pay, motivational talk increases output by about 20 percent and reduces the ratio of mistakes by more than 40 percent.

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Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 451.

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Date of creation: Dec 2013
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Handle: RePEc:trf:wpaper:451

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Keywords: Verbal Motivation; Performance Pay; Field Experiment;

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  1. Roland Benabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 70(3), pages 489-520, 07.
  2. Christiane Bradler & Robert Dur & Susanne Neckermann & Arjan Non, 2013. "Employee Recognition and Performance: A Field Experiment," CESifo Working Paper Series 4164, CESifo Group Munich.
  3. Anthony M. Marino & Ján Zábojník, 2008. "Work-related perks, agency problems, and optimal incentive contracts," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 565-585.
  4. Samuel Bowles & Sandra Polania-Reyes, 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 368-425, June.
  5. Roland Bénabou & Jean Tirole, 2004. "Incentives and Prosocial Behavior," Working Papers 137, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  6. Sliwka, Dirk, 2006. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," IZA Discussion Papers 2293, Institute for the Study of Labor (IZA).
  7. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, American Economic Association, vol. 98(3), pages 990-1008, June.
  8. Frey, Bruno S & Oberholzer-Gee, Felix, 1997. "The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out," American Economic Review, American Economic Association, American Economic Association, vol. 87(4), pages 746-55, September.
  9. 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.
  10. Robert Dur & Arjan Non & Hein Roelfsema, 2008. "Reciprocity and Incentive Pay in the Workplace," Tinbergen Institute Discussion Papers 08-080/1, Tinbergen Institute.
  11. Pokorny, Kathrin, 2008. "Pay--but do not pay too much: An experimental study on the impact of incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 251-264, May.
  12. Sebastian Kube & Michel Andre Marechal & Clemens Puppe, 2012. "The Currency of Reciprocity: Gift Exchange in the Workplace," American Economic Review, American Economic Association, American Economic Association, vol. 102(4), pages 1644-62, June.
  13. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality-super-," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(1), pages 1-49, February.
  14. Kosfeld, Michael & Neckermann, Susanne, 2010. "Getting More Work for Nothing? Symbolic Awards and Worker Performance," IZA Discussion Papers 5040, Institute for the Study of Labor (IZA).
  15. Jordi Brandts & David J. Cooper, 2007. "It's What You Say, Not What You Pay: An Experimental Study of Manager–Employee Relationships in Overcoming Coordination Failure," Journal of the European Economic Association, MIT Press, MIT Press, vol. 5(6), pages 1223-1268, December.
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