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Bad News: An Experimental Study on the Informational Effects Of Rewards

Author

Listed:
  • Andrei Bremzen

    (CEFIR and New Economic School)

  • Elena Khokhlova

    (McKinsey & Company)

  • Anton Suvorov

    (Higher School of Economics)

  • Jeroen van de Ven

    (Amsterdam Center for Law and Economics, University of Amsterdam, and Tinbergen Institute)

Abstract

Psychologists and economists have argued that rewards often have hidden costs. One possible reason is that the principal may have incentives to offer higher rewards when she knows the task is difficult. Our experiment tests if high rewards embody such bad news and if this is correctly perceived by their recipients. Our design allows us to decompose the overall effect of rewards on effort into a direct incentive and an informational effect. The results show that participants correctly interpret high rewards as bad news. In accordance with theory, the negative informational effect coexists with the direct positive effect. © 2015 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Andrei Bremzen & Elena Khokhlova & Anton Suvorov & Jeroen van de Ven, 2015. "Bad News: An Experimental Study on the Informational Effects Of Rewards," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 55-70, March.
    • Handle: RePEc:tpr:restat:v:97:y:2015:i:1:p:55-70
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How bonuses backfire
      by chris dillow in Stumbling and Mumbling on 2011-09-19 19:06:31
    2. Ronnie O'Sullivan & the limits of incentives
      by chris in Stumbling and Mumbling on 2016-02-16 19:36:36
    3. Incentives as ideology
      by chris in Stumbling and Mumbling on 2016-04-06 17:35:07

    Citations

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    Cited by:

    1. Jérôme Hergueux & Nicolas Jacquemet & Stéphane Luchini & Jason F. Shogren, 2022. "Leveraging the Honor Code: Public Goods Contributions under Oath," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(3), pages 591-616, March.
    2. Roland Bénabou & Jean Tirole, 2026. "Laws and Norms," Journal of Political Economy, University of Chicago Press, vol. 134(2), pages 731-772.
    3. Galbiati, Roberto & Schlag, Karl H. & van der Weele, Joël J., 2013. "Sanctions that signal: An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 34-51.
    4. Marvin Deversi & Lisa Spantig, 2023. "Incentive and Signaling Effects of Bonus Payments: An Experiment in a Company," CESifo Working Paper Series 10302, CESifo.
    5. Haoran He & David Neumark & Qian Weng, 2021. "Do Workers Value Flexible Jobs? A Field Experiment," Journal of Labor Economics, University of Chicago Press, vol. 39(3), pages 709-738.
    6. repec:spo:wpmain:info:hdl:2441/7o52iohb7k6srk09o0ks2e12i is not listed on IDEAS
    7. Jakob Alfitian & Dirk Sliwka & Timo Vogelsang, 2021. "When Bonuses Backfire: Evidence from the Workplace," Natural Field Experiments 00725, The Field Experiments Website.
    8. Alekseev, Aleksandr & Charness, Gary & Gneezy, Uri, 2017. "Experimental methods: When and why contextual instructions are important," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 48-59.
    9. Aleksandr Alekseev, 2022. "Give me a challenge or give me a raise," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 170-202, February.
    10. Melody M. Chao & Rajeev Dehejia & Anirban Mukhopadhyay & Sujata Visaria, 2015. "Unintended Negative Consequences of Rewards for Student Attendance: Results from a Field Experiment in Indian Classrooms," HKUST IEMS Working Paper Series 2015-22, HKUST Institute for Emerging Market Studies, revised Apr 2015.
    11. Coffman, Lucas & Niehaus, Paul, 2020. "Pathways of persuasion," Games and Economic Behavior, Elsevier, vol. 124(C), pages 239-253.
    12. Vanessa, Mertins & Jeworrek, Sabrina & Vlassopoulos, Michael, 2018. ""The Good News about Bad News": Feedback about Past Organisational Failure Bad ist Impact in Worker Productivity," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181644, Verein für Socialpolitik / German Economic Association.
    13. Cécile Bazart & Dimitri Dubois & Kate Farrow & Lisette Ibanez & Alain Marciano & Nathalie Moureau & Rustam Romaniuc & Julie Rosaz & Sébastien Roussel, 2017. "NORMES : NORmes sociales, Motivations Externes et internes, et politiques publiqueS," Working Papers hal-02938187, HAL.
    14. Jeworrek, Sabrina & Mertins, Vanessa & Vlassopoulos, Michael, 2018. ""The good news about bad news": Feedback about past organisational failure and its impact on worker productivity," IWH Discussion Papers 1/2018, Halle Institute for Economic Research (IWH).

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    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development

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