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The Behavioralist Visits the Factory: Increasing Productivity Using Simple Framing Manipulations

  • Tanjim Hossain

    ()

    (Rotman School of Management, University of Toronto, Toronto, Ontario M5S 3E6, Canada)

  • John A. List

    ()

    (Department of Economics, University of Chicago, Chicago, Illinois 60673)

Recent discoveries in behavioral economics have led to important new insights concerning what can happen in markets. Such gains in knowledge have come primarily via laboratory experiments--a missing piece of the puzzle in many cases is parallel evidence drawn from naturally occurring field counterparts. We provide a small movement in this direction by taking advantage of a unique opportunity to work with a Chinese high-tech manufacturing facility. Our study revolves around using insights gained from one of the most influential lines of behavioral research--framing manipulations--in an attempt to increase worker productivity in the facility. Using a natural field experiment, we report several insights. For example, conditional incentives framed as both "losses" and "gains" increase productivity for both individuals and teams. In addition, teams more acutely respond to bonuses posed as losses than as comparable bonuses posed as gains. The magnitude of this framing effect is roughly 1%: that is, total team productivity is enhanced by 1% purely due to the framing manipulation. Importantly, we find that neither the framing nor the incentive effect lose their significance over time; rather, the effects are observed over the entire sample period. Moreover, we learn that repeated interaction with workers and conditionality of the bonus contract are substitutes for sustenance of incentive effects in the long run. This paper was accepted by Gérard P. Cachon, decision analysis.

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File URL: http://dx.doi.org/10.1287/mnsc.1120.1544
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 58 (2012)
Issue (Month): 12 (December)
Pages: 2151-2167

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Handle: RePEc:inm:ormnsc:v:58:y:2012:i:12:p:2151-2167
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  1. John List, 2004. "Neoclassical theory versus prospect theory: Evidence from the marketplace," Framed Field Experiments 00174, The Field Experiments Website.
  2. Janet Landa & Xiao Wang, 2001. "Bounded Rationality of Economic Man: Decision Making under Ecological, Social, and Institutional Constraints," Journal of Bioeconomics, Springer, vol. 3(2), pages 217-235, May.
  3. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-47, June.
  4. John List & Uri Gneezy, 2006. "Putting behavioral economics to work: Testing for gift exchange in labor markets using field experiments," Natural Field Experiments 00259, The Field Experiments Website.
  5. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  6. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  7. David Reiley & John List, 2008. "Field experiments," Artefactual Field Experiments 00091, The Field Experiments Website.
  8. John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments 00297, The Field Experiments Website.
  9. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
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