Shirking and “choking” under incentive-based pressure: A behavioral economic theory of performance production
Significant empirical evidence exists within psychology and economics that greater incentives under pressure can lead to lower performance outcomes. However, standard economic theory does not account for this possibility. Efficiency wage models, for example, conclude a positive relationship between wage incentives and productivity. While efficiency wage models are shown to describe productivity behavior in numerous settings, said models do not describe labor markets featuring (counterproductive) performance pressure. We put forth a theoretical model of performance production in which performance incentives induce productive effects and counterproductive effects. The model treats explicit monitoring and distraction as distinct, counterproductive processes within a cohesive theory of performance production. In settings featuring performance pressure, we find that higher levels of performance-contingent compensation may decrease not only labor output (i.e., likelihood of task success) but also labor input (i.e., effort) if counterproductive processes decrease the marginal effectiveness of effort sufficiently. The latter finding challenges a common view that performance decrements under pressure occur despite greater effort levels.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
- Dohmen, Thomas J., 2008.
"Do professionals choke under pressure?,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 65(3-4), pages 636-653, March.
- Dohmen, Thomas, 2005. "Do Professionals Choke Under Pressure?," IZA Discussion Papers 1905, Institute for the Study of Labor (IZA).
- Thomas J. Dohmen, 2010. "Do Professionals Choke Under Pressure?," Working Papers id:2742, eSocialSciences.
- Akerlof, George A, 1984. "Gift Exchange and Efficiency-Wage Theory: Four Views," American Economic Review, American Economic Association, vol. 74(2), pages 79-83, May.
- Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 235-290 National Bureau of Economic Research, Inc.
- Lawrence F. Katz, 1986. "Efficiency Wage Theories: A Partial Evaluation," NBER Working Papers 1906, National Bureau of Economic Research, Inc.
- Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
- Zheng Cao & Joseph Price & Daniel F. Stone, 2011. "Performance Under Pressure in the NBA," Journal of Sports Economics, , vol. 12(3), pages 231-252, June.
- Dan Ariely & Uri Gneezy & George Loewenstein & Nina Mazar, 2009. "Large Stakes and Big Mistakes," Review of Economic Studies, Oxford University Press, vol. 76(2), pages 451-469.
- Dan Ariely & Uri Gneezy & George Loewenstein & Nina Mazar, 2005. "Large stakes and big mistakes," Working Papers 05-11, Federal Reserve Bank of Boston.
- Malcomson, James M, 1981. "Unemployment and the Efficiency Wage Hypothesis," Economic Journal, Royal Economic Society, vol. 91(364), pages 848-866, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:363-366. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.