The Effects of Monetary Incentives on Worker Learning and Performance in an Assembly Task

13 Pages Posted: 24 Aug 1998 Last revised: 1 Apr 2014

See all articles by Charles D. Bailey

Charles D. Bailey

James Madison University

Lawrence D. Brown

Temple University - Department of Accounting

Anthony F. Cocco

University of Nevada, Las Vegas

Date Written: December 8, 2012

Abstract

Accountants are concerned about the impact of incentive contracts on performance. Monetary incentives improve overall performance, but their effects on the components of performance are not well known. Performance on a repetitive task includes initial performance, subsequent improvement rate, and performance after learning ceases. Monetary incentives can affect any of these factors. This study examines the impact of piece-rate and goal-contingent incentives, versus fixed-pay, on initial performance and subsequent improvement rate in an assembly task. Previous literature has not simultaneously examined these components, which are homologous with the components of the industrial learning curve model. We find that both overall and initial performance, but not improvement rate, are higher in the incentive-pay groups. Two factors may explain the lack of differential improvement rates: subjects? effort allocation, since improving initial performance may be easier than improving subsequent performance; and the nature of these typical incentive-pay plans, which do not reward improvement directly.

JEL Classification: J33, M40, M46

Suggested Citation

Bailey, Charles D. and Brown, Lawrence D. and Cocco, Anthony, The Effects of Monetary Incentives on Worker Learning and Performance in an Assembly Task (December 8, 2012). Journal of Management Accounting Research, 1998. Available at SSRN: https://ssrn.com/abstract=117850

Charles D. Bailey (Contact Author)

James Madison University ( email )

Harrisonburg, VA 22807
United States
901 484-0867 (Phone)

Lawrence D. Brown

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Anthony Cocco

University of Nevada, Las Vegas ( email )

College of Business & Economics
4505 Maryland Parkway
Las Vegas, NV 89154-6003
United States
702-895-4658 (Phone)
702-895-4306 (Fax)

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