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Examining the Tradeoff Between Fixed Pay and Performance-Related Pay: A Choice Experiment Approach

Author

Listed:
  • Junui Shen

    (Research Institute for Economics and Business Administration, Kobe University)

  • Kazuhito Ogawa

    (Kansai University)

  • Hiromasa Takahashi

    (Hiroshima City University)

Abstract

Previous investigations on performance-related pay have mainly analyzed its relationships with earnings, productivity, and job satisfaction. Less attention has been devoted to the investigations of individuals’ preferences for the performance-related payment system per se and consequently the tradeoff between fixed pay and performance-related pay. In this paper, we first use a choice experiment approach to investigate the tradeoff between fixed pay and performance-related pay, and then link the tradeoff for each individual with their risk preferences. Our main results indicate that individuals’ preferences for the payment system per se and the magnitude of tradeoffs between fixed pay and performance pay are different according to their risk preferences.

Suggested Citation

  • Junui Shen & Kazuhito Ogawa & Hiromasa Takahashi, 2014. "Examining the Tradeoff Between Fixed Pay and Performance-Related Pay: A Choice Experiment Approach," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 6(2), pages 119-131, December.
    • Handle: RePEc:ren:journl:v:6:y:2014:i:2:p:119-131
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    Cited by:

    1. Sergey Shishkin & Aleksandr Temnitsky, 2017. "From Salary to the Performance-Based Remuneration of Russian Physicians: How Motivation at Work is Changing," HSE Working papers WP BRP 08/PSP/2017, National Research University Higher School of Economics.
    2. Weiyi Zhang & Hiromasa Takahashi & Junyi Shen, 2016. "Does Physical Exercise Affect Tradeoffs between Fixed Pay and Performance-related Pay for Individuals?," Discussion Paper Series DP2016-13, Research Institute for Economics & Business Administration, Kobe University.

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    Keywords

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    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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