Can higher bonuses lead to less effort? Incentive reversal in teams

Arbeitspapier

Conventional wisdom suggests that an increase in monetary incentives should induce agents to exert higher effort. In this paper, however, we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive reversal might occur: an increase in monetary incentives (either because rewards increase or effort costs decrease) may lead agents to exert lower effort in the completion of a joint task - even if agents are fully rational, self-centered money maximizers. Herein we discuss this seemingly paradoxical phenomenon and report on two experiments that provide supportive evidence.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 5501

Classification and Topics

• Classification: Wirtschaft ; Design of Experiments: Laboratory, Group Behavior ; Organizational Behavior; Transaction Costs; Property Rights ; Wage Level and Structure; Wage Differentials ; Compensation Packages; Payment Methods ; Labor Contracts ; Personnel Management; Executives; Executive Compensation ; Personnel Economics: Compensation and Compensation Methods and Their Effects
• Subject: incentives ; incentive reversal ; team production ; externalities ; laboratory experiments ; personnel economics ; Arbeitsgruppe ; Leistungsmotivation ; Leistungsentgelt ; Ökonomischer Anreiz ; Arbeitsleistung ; Test

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Klor, Esteban F. ; Kube, Sebastian ; Winter, Eyal ; Zultan, Ro'i
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/51878
• URN: urn:nbn:de:101:1-201104113740
• Last update: 10.03.2025, 11:43 AM CET