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Bonus Payments and Reference Point Violations

Author

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  • Ockenfels, Axel

    (University of Cologne)

  • Sliwka, Dirk

    (University of Cologne)

  • Werner, Peter

    (Maastricht University)

Abstract

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.

Suggested Citation

  • Ockenfels, Axel & Sliwka, Dirk & Werner, Peter, 2010. "Bonus Payments and Reference Point Violations," IZA Discussion Papers 4795, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4795
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    Keywords

    job performance; job satisfaction; bonus payments; incentives; reference points;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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