Large stakes and big mistakes
Most upper-management and sales force personnel, as well as workers in many other jobs, are paid based on performance, which is widely perceived as motivating effort and enhancing productivity relative to non-contingent pay schemes. However, psychological research suggests that excessive rewards can in some cases produce supra-optimal motivation, resulting in a decline in performance. To test whether very high monetary rewards can decrease performance, we conducted a set of experiments at MIT, the University of Chicago, and rural India. Subjects in our experiment worked on different tasks and received performance-contingent payments that varied in amount from small to large relative to their typical levels of pay. With some important exceptions, we observed that high reward levels can have detrimental effects on performance.
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References listed on IDEAS
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- 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.
- Colin Camerer & Linda Babcock & George Loewenstein & Richard Thaler, 1997.
"Labor Supply of New York City Cabdrivers: One Day at a Time,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(2), pages 407-441.
- Camerer, Colin & Babcock, Linda & Loewenstein, George & Thaler, Richard, 1996. "Labor Supply of New York City Cab Drivers: One Day At A time," Working Papers 960, California Institute of Technology, Division of the Humanities and Social Sciences.
- Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
- Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December. Full references (including those not matched with items on IDEAS)
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