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Bonus Payments and Reference Point Violations

  • Ockenfels, Axel

    ()

    (University of Cologne)

  • Sliwka, Dirk

    ()

    (University of Cologne)

  • Werner, Peter

    ()

    (University of Cologne)

We investigate how bonus payments affect satisfaction and performance of managers in a large, multinational company. We find that falling behind a naturally occurring reference point for bonus comparisons reduces satisfaction and subsequent performance. The effects tend to be mitigated if information about one's relative standing towards the reference point is withheld.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4795.

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Length: 31 pages
Date of creation: Feb 2010
Date of revision:
Publication status: published in: Management Science, 2015, 61 (7), 1496-1513
Handle: RePEc:iza:izadps:dp4795
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