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Exploitation aversion: When financial incentives fail to motivate agents

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  • Carpenter, Jeffrey
  • Dolifka, David

Abstract

Studies of the principal-agent relationship find that monetary incentives work in many instances but that they can also backfire. Various mechanisms for this failure have been examined (e.g., intrinsic motivation, image concerns). We posit that an aversion to being exploited, i.e., being used instrumentally for another’s benefit, can also cause incentives to fail. Using an experiment we find that compliance is lower for exploitative principals compared to neutral ones despite using the same contracts. To corroborate our results we show that surveyed “exploitation aversion” mediates this effect. Our results have implications for the design and implementation of incentives within organizations.

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  • Carpenter, Jeffrey & Dolifka, David, 2017. "Exploitation aversion: When financial incentives fail to motivate agents," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 213-224.
    • Handle: RePEc:eee:joepsy:v:61:y:2017:i:c:p:213-224
    DOI: 10.1016/j.joep.2017.04.006
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    More about this item

    Keywords

    Financial incentives; Motivation; Crowding; Power; Exploitation; Experiment;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M55 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Contracting Devices

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