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Incentives, Gaming, and the Nonlinear Pay Scheme: Evidence from Personnel Data in a Large Japanese Auto Sales Firm

Author

Listed:
  • Tsuru, Tsuyoshi

Abstract

This paper examines incentives and gaming behavior in a sales workforce using personnel records from one of Japan's largest auto sales chains. The company replaced a simple, linear compensation system in 2000 with nonlinear pay scheme kinked around a draw line. Econometric analysis indicates the following. First, the new pay scheme yields productivity increases, although a month-end deadline induces gaming behavior. Second, the incentive effect is weaker for used car sales staff than for new car sales staff. The difference can be attributed to disincentives such as smaller gross profits and larger servicing burdens that discouraged workers near the threshold from putting forth additional effort.

Suggested Citation

  • Tsuru, Tsuyoshi, 2008. "Incentives, Gaming, and the Nonlinear Pay Scheme: Evidence from Personnel Data in a Large Japanese Auto Sales Firm," Discussion Paper Series a510, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hituec:a510
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/16801/1/DP510.pdf
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    More about this item

    Keywords

    Compensation; Automobile Dealership; Incentives; Gaming;

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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