IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v116y2012i3p363-366.html
   My bibliography  Save this article

Shirking and “choking” under incentive-based pressure: A behavioral economic theory of performance production

Author

Listed:
  • Sanders, Shane
  • Walia, Bhavneet

Abstract

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.

Suggested Citation

  • Sanders, Shane & Walia, Bhavneet, 2012. "Shirking and “choking” under incentive-based pressure: A behavioral economic theory of performance production," Economics Letters, Elsevier, vol. 116(3), pages 363-366.
  • Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:363-366
    DOI: 10.1016/j.econlet.2012.03.030
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512001267
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
    2. Dohmen, Thomas J., 2008. "Do professionals choke under pressure?," Journal of Economic Behavior & Organization, Elsevier, vol. 65(3-4), pages 636-653, March.
    3. 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.
    4. 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.
    5. Malcomson, James M, 1981. "Unemployment and the Efficiency Wage Hypothesis," Economic Journal, Royal Economic Society, vol. 91(364), pages 848-866, December.
    6. 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.
    7. 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.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nicolas Houy & Jean-Philippe Nicolaï & Marie Claire Villeval, 2017. "Always doing your best? Effort and performance in dynamic settings," Working Papers halshs-01686501, HAL.
    2. Essl, Andrea & Jaussi, Stefanie, 2017. "Choking under time pressure: The influence of deadline-dependent bonus and malus incentive schemes on performance," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 127-137.
    3. Nicolas Houy & Jean-Philippe Nicolaï & Marie Claire Villeval, 2017. "Always doing your best? Effort and performance in dynamic settings," Working Papers 1736, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.

    More about this item

    Keywords

    Performance incentives; Choking under pressure; Shirking under pressure;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. 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). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.