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An Experimental Examination of Compensation Schemes and Level of Effort in Differentiated Tasks

Author

Listed:
  • Hiromasa Takahashi

    (Faculty of International Studies, Hiroshima City University, Japan)

  • Junyi Shen

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Kazuhito Ogawa

    (Faculty of Sociology, Kansai University, Japan)

Abstract
We examine the influence of different compensation schemes on exertion of effort for differentiated tasks. The first type of task is assumed to be boring and has no intrinsic motivation, while the second is assumed to be interesting, and has a higher intrinsic motivation. The results are as follows: (1) in the first task, standard economic theory, which claims higher pay should result in higher effort, does not hold. (2) Standard economic theory holds for the second task, which predicts that the higher the incentive, the more effort one exerts, and achieves a higher performance on average.

Suggested Citation

  • Hiromasa Takahashi & Junyi Shen & Kazuhito Ogawa, 2014. "An Experimental Examination of Compensation Schemes and Level of Effort in Differentiated Tasks," Discussion Paper Series DP2014-20, Research Institute for Economics & Business Administration, Kobe University.
    • Handle: RePEc:kob:dpaper:dp2014-20
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    File URL: https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2014-20.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Cala, Petr & Havranek, Tomas & Irsova, Zuzana & Matousek, Jindrich & Novak, Jiri, 2022. "Financial Incentives and Performance: A Meta-Analysis of Economics Evidence," CEPR Discussion Papers 17680, C.E.P.R. Discussion Papers.
    3. Adrian Chadi & Mario Mechtel & Vanessa Mertins, 2022. "Smartphone bans and workplace performance," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 287-317, February.
    4. Gill, David & Prowse, Victoria, 2019. "Measuring costly effort using the slider task," Journal of Behavioral and Experimental Finance, Elsevier, vol. 21(C), pages 1-9.
    5. Florian Englmaier & Stefan Grimm & Dominik Grothe & David Schindler & Simeon Schudy, 2024. "The Effect of Incentives in Nonroutine Analytical Team Tasks," Journal of Political Economy, University of Chicago Press, vol. 132(8), pages 2695-2747.
    6. Dorner, Zack & Lancsar, Emily, 2023. "Don’t pay the highly motivated too much," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 103(C).
    7. Patrick Reinwald & Stephan Leitner & Friederike Wall, 2021. "Limited intelligence and performance-based compensation: An agent-based model of the hidden action problem," Papers 2107.03764, arXiv.org.
    8. Zack Dorner & Emily Lancsar, 2017. "Intrinsic motivation, health outcomes and the crowding out effect of temporary extrinsic incentives: A lab-in-the-field experiment," Monash Economics Working Papers 18-17, Monash University, Department of Economics.
    9. Erkal, Nisvan & Gangadharan, Lata & Koh, Boon Han, 2018. "Monetary and non-monetary incentives in real-effort tournaments," European Economic Review, Elsevier, vol. 101(C), pages 528-545.
    10. Taylor, Matthew P., 2020. "Heterogeneous motivation and cognitive ability in the lab," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 85(C).

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    More about this item

    Keywords

    Real effort experiment; Intrinsic motivation; Loss aversion; Fixed pay; Incentive pay;
    All these keywords.

    JEL classification:

    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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