Wage delegation and intrinsic motivation: an experimental study

The aim of this study is to investigate experimentally whether and to what extent subjects’ intrinsic motivation and performance change when they are allowed to self-set their own wage for performing a task; moreover, it investigates how differently motivated people react to the possibility of deter- mining their own wage. We propose a novel experimental design, in which the subjects are asked to perform a complex real-effort task under two different conditions: wages can be either chosen by the subjects themselves, or randomly determined. With this setting, we are able to disentangle intrinsic motivation from the reciprocity concerns that are likely to characterize the standard principal-agent interaction. Our main result is that subjects increase their performance more when they are delegated the wage choice than when they receive a random payment; moreover, subjects who are both highly motivated and delegated their wage choice are those who perform better. Finally, subjects with higher motivation ask for lower wages.