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The Behavioralist Visits the Factory: Increasing Productivity Using Simple Framing Manipulations

  • Tanjim Hossain
  • John A. List

Recent discoveries in behavioral economics have led to important new insights concerning what can happen in markets. Such gains in knowledge have come primarily via laboratory experiments--a missing piece of the puzzle in many cases is parallel evidence drawn from naturally-occurring field counterparts. We provide a small movement in this direction by taking advantage of a unique opportunity to work with a Chinese high-tech manufacturing facility. Our study revolves around using insights gained from one of the most influential lines of behavioral research--framing manipulations--in an attempt to increase worker productivity in the facility. Using a natural field experiment, we report several insights. For example, conditional incentives framed as both "losses" and "gains" increase productivity for both individuals and teams. In addition, teams more acutely respond to bonuses posed as losses than as comparable bonuses posed as gains. The magnitude of the effect is roughly 1%: that is, total team productivity is enhanced by 1% purely due to the framing manipulation. Importantly, we find that neither the framing nor the incentive effect lose their importance over time; rather the effects are observed over the entire sample period. Moreover, we learn that worker reputation and conditionality of the bonus contract are substitutes for sustenance of incentive effects in the long-run production function.

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File URL: http://www.nber.org/papers/w15623.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15623.

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Date of creation: Dec 2009
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Publication status: published as Tanjim Hossain & John A. List, 2012. "The Behavioralist Visits the Factory: Increasing Productivity Using Simple Framing Manipulations," Management Science, INFORMS, vol. 58(12), pages 2151-2167, December.
Handle: RePEc:nbr:nberwo:15623
Note: LS PR
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  1. Glenn Harrison & John List, 2004. "Field experiments," Artefactual Field Experiments 00058, The Field Experiments Website.
  2. Samuelson, William & Zeckhauser, Richard, 1988. " Status Quo Bias in Decision Making," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 7-59, March.
  3. Uri Gneezy & John A. List, 2006. "Putting Behavioral Economics to Work: Testing for Gift Exchange in Labor Markets Using Field Experiments," NBER Working Papers 12063, National Bureau of Economic Research, Inc.
  4. John A. List, 2004. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Econometrica, Econometric Society, vol. 72(2), pages 615-625, 03.
  5. John A. List, 2003. "Does Market Experience Eliminate Market Anomalies?," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 41-71, February.
  6. Janet Landa & Xiao Wang, 2001. "Bounded Rationality of Economic Man: Decision Making under Ecological, Social, and Institutional Constraints," Journal of Bioeconomics, Springer, vol. 3(2), pages 217-235, May.
  7. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  8. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
  9. Hanemann, W Michael, 1991. "Willingness to Pay and Willingness to Accept: How Much Can They Differ?," American Economic Review, American Economic Association, vol. 81(3), pages 635-47, June.
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