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Workaholics and Dropouts in Organizations

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  • Wieland Müller
  • Andrew Schotter

Abstract

This paper reports the results of experiments designed to test the theory of the optimal composition of prizes in contests. In the aggregate the behavior of subjects is consistent with that predicted by the theory, but we find that such aggregate results mask an unexpected compositional effect on the individual level. Whereas theory predicts that subject efforts are continuous and increasing functions of ability, the actual efforts of our laboratory subjects bifurcate. Low-ability workers drop out and exert little or no effort, and high-ability workers try too hard. This bifurcation, which is masked by aggregation, can be explained by assuming loss aversion on the part of the subjects. (JEL: C92, D44, D72, D82, J31) (c) 2010 by the European Economic Association.

Suggested Citation

  • Wieland Müller & Andrew Schotter, 2010. "Workaholics and Dropouts in Organizations," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 717-743, June.
  • Handle: RePEc:tpr:jeurec:v:8:y:2010:i:4:p:717-743
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    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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