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Self-Selection and the Power of Incentive Schemes: An Experimental Study

Author

Listed:
  • Jana Vyrastekova

    (Radboud University Nijmegen, the Netherlands)

  • Sander Onderstal

    (University of Amsterdam, the Netherlands)

  • Pierre Koning

    (CPB Netherlands Bureau for Economic Policy Analysis, the Netherlands)

Abstract

This discussion paper led to an article in Applied Economics (2012). Vol. 44(32), pages 4211-4219. We examine how self-selection of workers into firms depends on the power of the firms' incentive schemes and how it affects the performance of firms that increase the power of the incentive schemes. In a laboratory experiment, we let subjects choose between (low-powered) team incentives and (high-powered) individual incentives. We observe that subjects exhibiting high trust or reciprocity in the trust game are more likely to choose team incentives. When exposed to individual incentives, workers who chose team incentives perform worse if both the unobservable interdependency between workers and their incentive to cooperate under team incentives are high.

Suggested Citation

  • Jana Vyrastekova & Sander Onderstal & Pierre Koning, 2010. "Self-Selection and the Power of Incentive Schemes: An Experimental Study," Tinbergen Institute Discussion Papers 10-074/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20100074
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    More about this item

    Keywords

    Incentive scheme; Self-selection; Laboratory experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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