Incentives and Group Identity
This paper investigates in a principal-agent environment whether and how group membership influences the effectiveness of incentives and when incentives can have “hidden costs”, i.e., a detrimental effect. We show experimentally that in all interactions control mechanisms can have hidden costs for reasons specific to group membership. In within-group interactions control has detrimental effects because the agent does not expect to be controlled and reacts negatively when being controlled. In between-group interactions, agents perceive control more hostile once we condition on their beliefs about principal's behavior. Our finding contributes to the micro-foundation of psychological effects of incentives.
|Date of creation:||Aug 2012|
|Date of revision:|
|Publication status:||published in: Games and Economic Behavior, 2014, 86, 12-25|
|Contact details of provider:|| Postal: |
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Fehr, Ernst & Klein, Alexander & Schmidt, Klaus M., 2007.
"Fairness and contract design,"
Munich Reprints in Economics
20618, University of Munich, Department of Economics.
- Fehr, Ernst & Klein, Alexander & Schmidt, Klaus M., 2005. "Fairness and Contract Design," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 67, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Matteo Ploner & Katrin Schmelz & Anthony Ziegelmeyer, 2010. "Hidden Costs of Control: Three Repetitions and an Extension," Jena Economic Research Papers 2010-007, Friedrich-Schiller-University Jena.
- Ferdinand von Siemens, 2011. "Intention-Based Reciprocity and the Hidden Costs of Control," Tinbergen Institute Discussion Papers 11-115/1, Tinbergen Institute.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- 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.
- Ellingsen, Tore & Johannesson, Magnus, 2006. "Pride and Prejudice: The Human Side of Incentive Theory," CEPR Discussion Papers 5768, C.E.P.R. Discussion Papers.
- Oriana Bandiera & Iwan Barankay & Imran Rasul, 2009.
"Social Connections and Incentives in the Workplace: Evidence From Personnel Data,"
Econometric Society, vol. 77(4), pages 1047-1094, 07.
- Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2009. "Social Connections and Incentives in the Workplace: Evidence from Personnel Data," CEPR Discussion Papers 7114, C.E.P.R. Discussion Papers.
- Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2008. "Social Connections and Incentives in the Workplace: Evidence from Personnel Data," IZA Discussion Papers 3917, Institute for the Study of Labor (IZA).
- Eckel, Catherine C. & Grossman, Philip J., 2005. "Managing diversity by creating team identity," Journal of Economic Behavior & Organization, Elsevier, vol. 58(3), pages 371-392, November.
- Jordi Brandts & Gary Charness, 2011. "The strategy versus the direct-response method: a first survey of experimental comparisons," Experimental Economics, Springer, vol. 14(3), pages 375-398, September.
- Anthony Ziegelmeyer & Katrin Schmelz & Matteo Ploner, 2012. "Hidden costs of control: four repetitions and an extension," Experimental Economics, Springer, vol. 15(2), pages 323-340, June.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6815. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.