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One size fits all? The interplay of incentives, effort provision, and personality

Author

Listed:
  • Zvonimir Bašic

    (Adam Smith Business School, University of Glasgow, UK)

  • Stefania Bortolotti

    (University of Bologna)

  • Daniel Salicath

    (Norwegian Labour and Welfare Administration)

  • Stefan Schmidt

    (Max Planck Institute for Research on Collective Goods, Bonn)

  • Sebastian Schneider

    (Max Planck Institute for Research on Collective Goods, Bonn)

  • Matthias Sutter

    (Max Planck Institute for Research on Collective Goods, Bonn, University of Cologne, Germany, University of Innsbruck, Austria, IZA Bonn, Germany, and CESifo Munich)

Abstract

Incentives are supposed to increase effort, yet individuals react differently to incentives. We examine this heterogeneity by investigating how personal characteristics, preferences, and socio-economic background relate to incentives and performance in a real effort task. We analyze the performance of 1,933 high-school students under a Fixed, Variable, or Tournament payment. Productivity and beliefs about relative performance, but hardly any personal characteristics, play a decisive role for performance when payment schemes are exogenously imposed. Only when given the choice to select the payment scheme, personality traits, economic preferences and socioeconomic background matter. Algorithmic assignment of payment schemes could improve performance, earnings, and utility, as we show.

Suggested Citation

  • Zvonimir Bašic & Stefania Bortolotti & Daniel Salicath & Stefan Schmidt & Sebastian Schneider & Matthias Sutter, 2024. "One size fits all? The interplay of incentives, effort provision, and personality," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2024_13, Max Planck Institute for Behavioral Economics.
    • Handle: RePEc:mpg:wpaper:2024_13
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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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