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More effort with less pay: On information avoidance, belief design and performance

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  • Huck, Steffen
  • Szech, Nora
  • Wenner, Lukas M.

Abstract

In a tedious real effort task, subjects know that their piece rate is either low or ten times higher. When subjects are informed about their piece rate realization, they adapt their performance. One third of subjects nevertheless forego this instrumental information when given the choice - and perform stunningly well. Agents who are uninformed regarding their piece rate tend to outperform all others, even those who know that their piece rate is high. This also holds for enforced instead of self-selected information avoidance. All our findings can be captured by a model of optimally distorted expectations following Brunnermeier and Parker (2005).

Suggested Citation

  • Huck, Steffen & Szech, Nora & Wenner, Lukas M., 2015. "More effort with less pay: On information avoidance, belief design and performance," Working Paper Series in Economics 72, Karlsruhe Institute of Technology (KIT), Department of Economics and Management.
    • Handle: RePEc:zbw:kitwps:72
    DOI: 10.5445/IR/1000049791
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    Cited by:

    1. Ambroise Descamps & Changxia Ke & Lionel Page, 2022. "How success breeds success," Quantitative Economics, Econometric Society, vol. 13(1), pages 355-385, January.
    2. Liu, Jia & Sonntag, Axel & Zizzo, Daniel John, 2022. "Information defaults in repeated public good provision," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 356-369.
    3. Steffen Huck & Nora Szech & Lukas M. Wenner, 2015. "More Effort with Less Pay: On Information Avoidance, Belief Design and Performance," CESifo Working Paper Series 5542, CESifo.
    4. Nikolaus Schweizer & Nora Szech, 2018. "Optimal Revelation of Life-Changing Information," Management Science, INFORMS, vol. 64(11), pages 5250-5262, November.
    5. Ambroise Descamps & Changxia Ke & Lionel Page, 2022. "How success breeds success," Quantitative Economics, Econometric Society, vol. 13(1), pages 355-385, January.

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    More about this item

    Keywords

    Optimal Expectations; Belief Desing; Performance; Real Effort Task; Coarse Incentive Structures; Workplace Incentives;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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