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Incentives and Group Identity

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  • Masella, Paolo

    () (University of Bologna)

  • Meier, Stephan

    () (Columbia University)

  • Zahn, Philipp

    () (University of Mannheim)

Abstract

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.

Suggested Citation

  • Masella, Paolo & Meier, Stephan & Zahn, Philipp, 2012. "Incentives and Group Identity," IZA Discussion Papers 6815, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6815
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    Cited by:

    1. repec:bla:ecinqu:v:55:y:2017:i:1:p:237-247 is not listed on IDEAS
    2. Mechtel, Mario & Hett, Florian & Kröll, Markus, 2014. "Endogenous Social Identity and Group Choice," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100307, Verein für Socialpolitik / German Economic Association.
    3. Tor Eriksson & Lei Mao & Marie Claire Villeval, 2017. "Saving face and group identity," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 622-647, September.
    4. Riener, Gerhard & Wiederhold, Simon, 2016. "Team building and hidden costs of control," Journal of Economic Behavior & Organization, Elsevier, vol. 123(C), pages 1-18.
    5. Kosfeld, Michael & Neckermann, Susanne & Yang, Xiaolan, 2014. "Knowing that you matter, matters! The interplay of meaning, monetary incentives, and worker recognition," ZEW Discussion Papers 14-097, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Michael Kosfeld & Susanne Neckermann & Xiaolan Yang, 2017. "The Effects Of Financial And Recognition Incentives Across Work Contexts: The Role Of Meaning," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 237-247, January.
    7. Karl H.Schlag, 2015. "Who gives Direction to Statistical Testing? Best Practice meets Mathematically Correct Tests," Vienna Economics Papers 1512, University of Vienna, Department of Economics.
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    9. Wiederhold, Simon & Riener, Gerhard, 2012. "Hidden Costs of Control in Social Groups," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 65407, Verein für Socialpolitik / German Economic Association.
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    More about this item

    Keywords

    trust; crowding out; motivation; incentives; social preferences; social identity; experiment;

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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