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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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    References listed on IDEAS

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    Cited by:

    1. Jérôme Hergueux & Nicolas Jacquemet & Stéphane Luchini & Jason Shogren, 2016. "Leveraging the Honor Code: Public Goods Contributions under Oath," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01379060, HAL.
    2. 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.
    3. Roland Benabou & Jean Tirole, 2011. "Laws and Norms," NBER Working Papers 17579, National Bureau of Economic Research, Inc.
    4. 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.
    5. 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.
    6. 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).

    More about this item

    Keywords

    incentive; psychologist; economist;

    JEL classification:

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

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