IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_4393.html
   My bibliography  Save this paper

Hidden Benefits of Reward: A Field Experiment on Motivation and Monetary Incentives

Author

Listed:
  • Ola Kvaløy
  • Petra Nieken
  • Anja Schöttner

Abstract

We conduct a field experiment in a controlled work environment to investigate the effect of motivational talk and its interaction with monetary incentives. We find that motivational talk significantly improves performance only if it is accompanied by performance pay. Moreover, performance pay reduces performance unless it is accompanied by motivational talk. By adding motivational sentences to an otherwise neutral explanation of the work task, the effect of performance pay goes from slightly negative to significantly positive. Hence, we find what we call a hidden benefit of monetary rewards: complementarity between performance pay and motivational talk.

Suggested Citation

  • Ola Kvaløy & Petra Nieken & Anja Schöttner, 2013. "Hidden Benefits of Reward: A Field Experiment on Motivation and Monetary Incentives," CESifo Working Paper Series 4393, CESifo.
    • Handle: RePEc:ces:ceswps:_4393
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp4393.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
    2. Jordi Brandts & David J. Cooper, 2007. "It's What You Say, Not What You Pay: An Experimental Study of Manager–Employee Relationships in Overcoming Coordination Failure," Journal of the European Economic Association, MIT Press, vol. 5(6), pages 1223-1268, December.
    3. Jordi Brandts & David J. Cooper & Roberto A. Weber, 2015. "Legitimacy, Communication, and Leadership in the Turnaround Game," Management Science, INFORMS, vol. 61(11), pages 2627-2645, November.
    4. Eriksson, Tor & Villeval, Marie Claire, 2012. "Respect and relational contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 81(1), pages 286-298.
    5. Charness, Gary & Dufwenberg, Martin, 2003. "Promises & Partnership," Research Papers in Economics 2003:3, Stockholm University, Department of Economics.
    6. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(1), pages 1-49.
    7. Uri Gneezy & Aldo Rustichini, 2000. "Pay Enough or Don't Pay at All," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 791-810.
    8. Heike Hennig-Schmidt & Bettina Rockenbach & Abdolkarim Sadrieh, 2010. "In Search Of Workers' Real Effort Reciprocity-A Field and a Laboratory Experiment," Journal of the European Economic Association, MIT Press, vol. 8(4), pages 817-837, June.
    9. Frey, Bruno S & Oberholzer-Gee, Felix, 1997. "The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out," American Economic Review, American Economic Association, vol. 87(4), pages 746-755, September.
    10. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
    11. Tore Ellingsen & Magnus Johannesson, 2004. "Promises, Threats and Fairness," Economic Journal, Royal Economic Society, vol. 114(495), pages 397-420, April.
    12. Dur, Robert & Non, Arjan & Roelfsema, Hein, 2010. "Reciprocity and incentive pay in the workplace," Journal of Economic Psychology, Elsevier, vol. 31(4), pages 676-686, August.
    13. Christiane Bradler & Robert Dur & Susanne Neckermann & Arjan Non, 2013. "Employee Recognition and Performance: A Field Experiment," Tinbergen Institute Discussion Papers 13-038/VII, Tinbergen Institute.
    14. Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 191-210, Fall.
    15. Michael Kosfeld & Susanne Neckermann, 2011. "Getting More Work for Nothing? Symbolic Awards and Worker Performance," American Economic Journal: Microeconomics, American Economic Association, vol. 3(3), pages 86-99, August.
    16. Pokorny, Kathrin, 2008. "Pay--but do not pay too much: An experimental study on the impact of incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 251-264, May.
    17. Kosfeld, Michael & Neckermann, Susanne & Yang, Xiaolan, 2014. "Knowing that You Matter, Matters! The Interplay of Meaning, Monetary Incentives, and Worker Recognition," IZA Discussion Papers 8055, Institute of Labor Economics (IZA).
    18. Brian Bell & John Reenen, 2014. "Bankers and Their Bonuses," Economic Journal, Royal Economic Society, vol. 124(574), pages 1-21, February.
    19. Anthony M. Marino & Ján Zábojník, 2008. "Work‐related perks, agency problems, and optimal incentive contracts," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 565-585, June.
    20. John Forth & Alex Bryson & Lucy Stokes, 2016. "Are firms paying more for performance?," International Journal of Manpower, Emerald Group Publishing Limited, vol. 37(2), pages 323-343, May.
    21. Dirk Sliwka, 2007. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," American Economic Review, American Economic Association, vol. 97(3), pages 999-1012, June.
    22. Armin Falk & Andrea Ichino, 2006. "Clean Evidence on Peer Effects," Journal of Labor Economics, University of Chicago Press, vol. 24(1), pages 39-58, January.
    23. List, John A., 2009. "An introduction to field experiments in economics," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 439-442, June.
    24. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    25. Gary Charness & Martin Dufwenberg, 2006. "Promises and Partnership," Econometrica, Econometric Society, vol. 74(6), pages 1579-1601, November.
    26. Ernst Fehr & Bettina Rockenbach, 2003. "Detrimental effects of sanctions on human altruism," Nature, Nature, vol. 422(6928), pages 137-140, March.
    27. Baldauf, Artur & Cravens, David W. & Grant, Kegn, 2002. "Consequences of sales management control in field sales organizations: a cross-national perspective," International Business Review, Elsevier, vol. 11(5), pages 577-609, October.
    28. Sebastian Kube & Michel Andre Marechal & Clemens Puppe, 2012. "The Currency of Reciprocity: Gift Exchange in the Workplace," American Economic Review, American Economic Association, vol. 102(4), pages 1644-1662, June.
    29. Charles Noussair & Steven Tucker, 2005. "Combining Monetary and Social Sanctions to Promote Cooperation," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 649-660, July.
    30. repec:feb:artefa:0089 is not listed on IDEAS
    31. repec:feb:artefa:0086 is not listed on IDEAS
    32. repec:feb:artefa:0087 is not listed on IDEAS
    33. Steven D. Levitt & John A. List, 2009. "Can Field Experiments Return Agricultural Economics to the Glory Days?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1259-1265.
    34. Levitt, Steven D. & List, John A., 2009. "Field experiments in economics: The past, the present, and the future," European Economic Review, Elsevier, vol. 53(1), pages 1-18, January.
    35. Bohnet, Iris & Frey, Bruno S. & Huck, Steffen, 2001. "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," American Political Science Review, Cambridge University Press, vol. 95(1), pages 131-144, March.
    36. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, vol. 98(3), pages 990-1008, June.
    37. Bruce Shearer, 2004. "Piece Rates, Fixed Wages and Incentives: Evidence from a Field Experiment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 513-534.
    38. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(3), pages 489-520.
    39. John Forth & Alex Bryson & Lucy Stokes, 2016. "Are firms paying more for performance?," International Journal of Manpower, Emerald Group Publishing, vol. 37(2), pages 323-343, May.
    40. Samuel Bowles & Sandra Polania-Reyes, 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 368-425, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bettinger, Eric & Ludvigsen, Sten & Rege, Mari & Solli, Ingeborg F. & Yeager, David, 2018. "Increasing perseverance in math: Evidence from a field experiment in Norway," Journal of Economic Behavior & Organization, Elsevier, vol. 146(C), pages 1-15.
    2. Michael Kosfeld & Susanne Neckermann & Xiaolan Yang, 2017. "The Effects Of Financial And Recognition Incentives Across Work Contexts: The Role Of Meaning," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 237-247, January.
    3. Kvaløy, Ola & Schöttner, Anja, 2015. "Incentives to motivate," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 26-42.
    4. Petra Nieken, 2022. "Digital leadership: Motivating online workers," IZA World of Labor, Institute of Labor Economics (IZA), pages 498-498, September.
    5. Niklas Kühl & Marius Mühlthaler & Marc Goutier, 2020. "Supporting customer-oriented marketing with artificial intelligence: automatically quantifying customer needs from social media," Electronic Markets, Springer;IIM University of St. Gallen, vol. 30(2), pages 351-367, June.
    6. Christiane Bradler & Susanne Neckermann, 2019. "The Magic of the Personal Touch: Field Experimental Evidence on Money and Appreciation as Gifts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 121(3), pages 1189-1221, July.
    7. Cassar, Lea & Armouti-Hansen, Jesper & Dereky, Anna & Engl, Florian, 2021. "Efficiency Wages with Motivated Agents," CEPR Discussion Papers 15723, C.E.P.R. Discussion Papers.
    8. Armouti-Hansen, Jesper & Cassar, Lea & Deréky, Anna & Engl, Florian, 2024. "Efficiency wages with motivated agents," Games and Economic Behavior, Elsevier, vol. 145(C), pages 66-83.
    9. Robert Dur & Ola Kvaløy & Anja Schöttner, 2022. "Leadership Styles and Labor Market Conditions," Management Science, INFORMS, vol. 68(4), pages 3150-3168, April.
    10. Casoria, Fortuna & Riedl, Arno & Werner, Peter, 2020. "Behavioral Aspects of Communication in Organizations," IZA Discussion Papers 13005, Institute of Labor Economics (IZA).
    11. Gjedrem, William Gilje & Rege, Mari, 2017. "The effect of less autonomy on performance in retail: Evidence from a quasi-natural field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 76-90.
    12. Donze, Jocelyn & Simard-Casanova, Olivier, 2018. "Managing Employees 'Insides' to Remedy Agency Problems? A Model of Transformational Leadership," MPRA Paper 94459, University Library of Munich, Germany.
    13. Florian Englmaier & Stefan Grimm & Dominik Grothe & David Schindler & Simeon Schudy, 2021. "The Value of Leadership: Evidence from a Large-Scale Field Experiment," CESifo Working Paper Series 9273, CESifo.
    14. Sebastian Fest & Ola Kvaløy & Petra Nieken & Anja Schöttner, 2019. "Motivation and incentives in an online labor market," CESifo Working Paper Series 7526, CESifo.
    15. Bradler, Christiane & Neckermann, Susanne, 2016. "The magic of the personal touch: Field experimental evidence on money appreciation as gifts," ZEW Discussion Papers 16-043, ZEW - Leibniz Centre for European Economic Research.
    16. Chadi, Adrian & Homolka, Konstantin, 2022. "Little Lies and Blind Eyes – Experimental Evidence on Cheating and Task Performance in Work Groups," Journal of Economic Behavior & Organization, Elsevier, vol. 199(C), pages 122-159.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    2. Luigino Bruni & Vittorio Pelligra & Tommaso Reggiani & Matteo Rizzolli, 2020. "The Pied Piper: Prizes, Incentives, and Motivation Crowding-in," Journal of Business Ethics, Springer, vol. 166(3), pages 643-658, October.
    3. Christiane Bradler & Robert Dur & Susanne Neckermann & Arjan Non, 2013. "Employee Recognition and Performance: A Field Experiment," Tinbergen Institute Discussion Papers 13-038/VII, Tinbergen Institute.
    4. Kajackaite, Agne & Werner, Peter, 2015. "The incentive effects of performance requirements – A real effort experiment," Journal of Economic Psychology, Elsevier, vol. 49(C), pages 84-94.
    5. Rebitzer, James B. & Taylor, Lowell J., 2011. "Extrinsic Rewards and Intrinsic Motives: Standard and Behavioral Approaches to Agency and Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 8, pages 701-772, Elsevier.
    6. Kvaløy, Ola & Olsen, Trond E., 2015. "The tenuous relationship between effort and performance pay," Journal of Public Economics, Elsevier, vol. 121(C), pages 32-39.
    7. Neckermann, Susanne & Yang, Xiaolan, 2017. "Understanding the (unexpected) consequences of unexpected recognition," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 131-142.
    8. Simon Gaechter & Esther Kessler & Manfred Koenigstein, 2011. "The roles of incentives and voluntary cooperation for contractual compliance," Discussion Papers 2011-06, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    9. Xiao, Erte, 2013. "Profit-seeking punishment corrupts norm obedience," Games and Economic Behavior, Elsevier, vol. 77(1), pages 321-344.
    10. Samuel Bowles & Sandra Polania-Reyes, 2011. "Economic incentives and social preferences: substitutes or complements?," Department of Economics University of Siena 617, Department of Economics, University of Siena.
    11. Volker Benndorf & Holger A. Rau & Christian Sölch, 2019. "Gender Differences In Motivational Crowding Out Of Work Performance," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 206-226, January.
    12. Vicente Calabuig & Enrique Fatas & Gonzalo Olcina & Ismael Rodriguez-Lara, 2013. "Carry a big stick, or no stick at all An experimental analysis of trust and capacity of punishment," Discussion Papers in Economic Behaviour 0413, University of Valencia, ERI-CES.
    13. Servátka, Maroš & Tucker, Steven & Vadovič, Radovan, 2011. "Words speak louder than money," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 700-709.
    14. Michael Kosfeld & Susanne Neckermann & Xiaolan Yang, 2017. "The Effects Of Financial And Recognition Incentives Across Work Contexts: The Role Of Meaning," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 237-247, January.
    15. Simon Gächter & Esther Kaiser & Manfred Königstein, 2024. "Incentive contracts crowd out voluntary cooperation: Evidence from gift-exchange experiments," Discussion Papers 2024-02, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    16. Julian Conrads & Bernd Irlenbusch & Tommaso Reggiani & Rainer Michael Rilke & Dirk Sliwka, 2016. "How to hire helpers? Evidence from a field experiment," Experimental Economics, Springer;Economic Science Association, vol. 19(3), pages 577-594, September.
    17. Raja Kali & David Pastoriza & Jean‐François Plante, 2018. "The burden of glory: Competing for nonmonetary incentives in rank‐order tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(1), pages 102-118, March.
    18. Bradler, Christiane & Neckermann, Susanne & Warnke, Arne Jonas, 2016. "Incentivizing creativity: A large-scale experiment with tournaments and gifts," ZEW Discussion Papers 16-040, ZEW - Leibniz Centre for European Economic Research.
    19. Sanjit Dhami, 2017. "Human Ethics and Virtues: Rethinking the Homo-Economicus Model," CESifo Working Paper Series 6836, CESifo.
    20. Lindeboom, Maarten & van der Klaauw, Bas & Vriend, Sandra, 2015. "The effect of audit regimes on applications for long-term care," CEPR Discussion Papers 10572, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    verbal motivation; performance pay; field experiment;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_4393. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.