The effects of financial incentives in experiments: A review and capital-labor-production framework (original) (raw)
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We conducted a field experiment in a controlled work environment to investigate the effect of motivational talk and its interaction with monetary incentives. We find that motivational talk significantly improves performance only when accompanied by performance pay. Moreover, performance pay slightly reduces performance unless it is accompanied by motivational talk. These effects also carry over to the quality of work. Performance pay alone leads to more mistakes. Adding motivational talk makes the difference. In treatments with performance pay, motivational talk increases output by about 20 percent and reduces the ratio of mistakes by more than 40 percent.
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Abstract: Read (2005), in The Journal of Economic Methodology, took our target article in Behavioral and Brain Sciences (Hertwig & Ortmann 2001) as one point of departure to question the usefulness of monetary incentives for experimental work. In making his case, he misrepresents our analysis, and continues the unfortunate ritual of opportunistic sampling of evidence. As in our target article, we call for an empirical analysis of the impact of monetary incentives.
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The purpose of this paper is to examine the effect of financial incentives on unattractive task. Pre-test and post-test were conducted to examine the effect of financial incentives on unattractive task. The data generated from University Student in Indonesia. Total 53 participant follow two stages of the experiment to do the assignment. The first stage to examine individual performance in the assignment without incentives and the second stage is the treatment group. One group with financial incentives while another group without financial incentives. The T-Test was examining to evaluate the difference between pre-test and post test result. The result shows that financial incentives could not change people perceived of unattractive task become attractive and could not increase individual performance in unattractive task. But people that perceived the assignment as attractive, they improve the performance when there are financial incentives. This research found that money could not sh...
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The paper by Camerer and Hogarth deals with the effects of financial incentives on the experimental study of goal-oriented behavior. The paper consists of an informal assessment of 74 studies followed by a list of stylized facts and conclusions, that are interpreted by drawing an analogy with the economic theory of capitallabor-production. Those involved in work with human subjects often face a variety of interrelated questions: Should subjects be paid? If, yes, how much? Is payment necessary andror important? The ''conventional'' answers to these questions tend to vary across disciplines: Whereas most experimental economists consider payments nec-Ž essary, many psychologists tend to avoid them see also Dawes, 1999; Hertwig and Ortman, 1998; Lopes, 1994; Zwick, Erev and Budescu, 1999 on the differences. between experimental practices in psychology and economics, and their sources. Camerer and Hogarth should be congratulated for summarizing empirical evidence across disciplinary boundaries and for trying to identify the circumstances under which financial incentives matter, and those aspects of behavior that are affected Ž by these incentives. This paper complements nicely other recent reviews listed in. their paper and its conclusions will, undoubtedly, be used to justify design decisions in many future experiments. Unfortunately, but not surprisingly, the studies reviewed by Camerer and Hogarth do not provide a simple, clear and unequivocal answer to their original question. However, as is often the case with similar literature reviews, their paper suggests important and interesting new research directions. I will discuss briefly two, which I consider to be especially promising. One of the most intriguing conclusions of the paper is that incentives are comparable to, and can substitute, or complement, other experimental factors. This is an important realization that could be used to develop a typology of cases where incentives are necessary, sufficient, marginally useful, or irrelevant to behavior. It Ž is easy to imagine a research program in which a certain target behavior say, forecasting future events, providing certainty equivalents to risky prospects, or
Psychological foundations of incentives
European Economic Review, 2002
During the last two decades economists have made much progress in understanding incentives, contracts and organisations. Yet, they constrained their attention to a very narrow and empirically questionable view of human motivation. The purpose of this paper is to show that this narrow view of human motivation may severely limit understanding the determinants and effects of incentives. Economists may fail to understand the levels and the changes in behaviour if they neglect motives like the desire to reciprocate or the desire to avoid social disapproval. We show that monetary incentives may backfire and reduce the performance of agents or their compliance with rules. In addition, these motives may generate very powerful incentives themselves. JEL-Classification: J41, C91, D64
Judgment and Decision Making, 2009
Researchers typically use incentives (such as money or course credit) in order to obtain participants who engage in the specific behaviors of interest to the researcher. There is, however, little understanding or agreement on the effects of different types and levels of incentives used. Some results in the domain of statistical reasoning suggest that performance differences—previously deemed theoretically important—may actually be due to differences in incentive types across studies. 704 participants completed one of five variants of a statistical reasoning task, for which they received either course credit, flat fee payment, or performance-based payment incentives. Successful task completion was more frequent with performance-based incentives than with either of the other incentive types. Performance on moderately difficult tasks (compared to very easy and very hard tasks) was most sensitive to incentives. These results can help resolve existing debates about inconsistent findings, guide more accurate comparisons across studies, and be applied beyond research settings.
Ambiguous incentives and the persistence of effort: Experimental evidence
Journal of Economic Behavior & Organization, 2014
Whereas economists have made extensive studies of the impact of levels of incentives on behavior, they have paid little attention to the effects of regularity and frequency of incentives. We contrasted three ways of rewarding participants in a realeffort experiment in which individuals had to decide when to exit the situation: a continuous reinforcement schedule (all periods paid); a fixed intermittent reinforcement schedule (one out of three periods paid); and a random intermittent reinforcement schedule (one out of three periods paid on a random basis). In all treatments, monetary rewards were withdrawn after the same unknown number of periods. Overall, intermittent reinforcement leads to more persistence and higher total effort, while participants in the continuous condition exit as soon as payment stops or decrease effort dramatically. Randomness increases the dispersion of effort, inducing both early exiting and persistence in behavior; overall, it reduces agents' payoffs. Our interpretation is that, in the presence of regime shifts, both the frequency and the randomness of the reinforcement schedules influence adjustments that participants make across time to their reference points in earnings expectations. This could explain why agents persist in activities although they lose money, such as excess trading in stock markets.
How different types of participant payoffs alter task performance
Judgment and decision making
Researchers typically use incentives (such as money or course credit) in order to obtain participants who engage in the specific behaviors of interest to the researcher. There is, however, little understanding or agreement on the effects of different types and levels of incentives used. Some results in the domain of statistical reasoning suggest that performance differences-previously deemed theoretically important-may actually be due to differences in incentive types across studies. 704 participants completed one of five variants of a statistical reasoning task, for which they received either course credit, flat fee payment, or performance-based payment incentives. Successful task completion was more frequent with performance-based incentives than with either of the other incentive types. Performance on moderately difficult tasks (compared to very easy and very hard tasks) was most sensitive to incentives. These results can help resolve existing debates about inconsistent findings, guide more accurate comparisons across studies, and be applied beyond research settings.
The Relation Between Financial Incentives, Motivation, and Performance
Journal of Personnel Psychology
To this day, researchers are debating the adequacy of using financial incentives to bolster performance in work settings. Our goal was to contribute to current understanding by considering the moderating role of distributive justice in the relation between financial incentives, motivation, and performance. Based on self-determination theory, we hypothesized that when bonuses are fairly distributed, using financial incentives makes employees feel more competent and autonomous, which in turn fosters greater autonomous motivation and lower controlled motivation, and better work performance. Results from path analyses in three samples supported our hypotheses, suggesting that the effect of financial incentives is contextual, and that compensation plans using financial incentives and bonuses can be effective when properly managed.
The Effect of Monetary Incentives on Cognitive Effort, Emotions and Test-Solving Performance
2018
The relation between monetary incentives, cognitive effort and task performance has been extensively studied. There is, however, scant experimental evidence about the concurrent effect of incentives on cognitive effort and emotions, and its implications for task performance. It is well documented that high-stakes tests correlate with students’ anxiety and performance, but the available evidence is not causal. In this paper we estimate the effect of providing a monetary prize on the cognitive effort, emotions and efficacy exhibited by a group of university students when solving a set of four mathematics and logical reasoning questions. The prize was conditional on answering all questions correctly and was randomly assigned within a group of 126 participants. We find that the incentive produced more cognitive effort but this did not translate into increased test-solving efficacy. We provide evidence suggesting that the absence of increased efficacy despite the greater input of cogniti...