Give me a challenge or give me a raise

Artikel

I study the effect of task difficulty on workers' effort. I find that task difficulty has an inverse-U effect on effort and that this effect is quantitatively large, especially when compared to the effect of conditional monetary rewards. Difficulty acts as a mediator of monetary rewards: conditional rewards are most effective at the intermediate or high levels of difficulty. The inverse-U pattern of effort response to difficulty is inconsistent with many popular models in the literature, including the Expected Utility models with the additively separable cost of effort. I propose an alternative mechanism for the observed behavior based on non-linear probability weighting. I structurally estimate the proposed model and find that it successfully captures the behavioral patterns observed in the data. I discuss the implications of my findings for the design of optimal incentive schemes for workers and for the models of effort provision.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Experimental Economics ; ISSN: 1573-6938 ; Volume: 25 ; Year: 2021 ; Issue: 1 ; Pages: 170-202 ; New York, NY: Springer US

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Individual ; Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making‡ ; Criteria for Decision-Making under Risk and Uncertainty ; Demand and Supply of Labor: General ; Compensation Packages; Payment Methods
• Subject: Incentives ; Task difficulty ; Monetary rewards ; Effort provision ; Probability weighting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Alekseev, Aleksandr
• Event: Veröffentlichung
• (who): Springer US
• (where): New York, NY
• (when): 2021

Further information

• DOI: doi:10.1007/s10683-021-09709-8
• Last update: 10.03.2025, 11:43 AM CET