Is There a 'Hidden Cost of Control' in Naturally-Occurring Markets? Evidence from a Natural Field Experiment

24 Pages Posted: 29 Sep 2011 Last revised: 5 Oct 2011

See all articles by Craig E. Landry

Craig E. Landry

UGA Ag & Applied Economics

Andreas Lange

University of Hamburg

John A. List

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Michael K. Price

University of Tennessee, Knoxville

Nicholas G. Rupp

East Carolina University - Department of Economics

Date Written: September 2011

Abstract

Several recent laboratory experiments have shown that the use of explicit incentives--such as conditional rewards and punishment--entail considerable "hidden" costs. The costs are hidden in the sense that they escape our attention if our reasoning is based on the assumption that people are exclusively self-interested. This study represents a first attempt to explore whether, and to what extent, such considerations affect equilibrium outcomes in the field. Using data gathered from nearly 3000 households, we find little support for the negative consequences of control in naturally-occurring labor markets. In fact, even though we find evidence that workers are reciprocal, we find that worker effort is maximized when we use conditional--not unconditional--rewards to incent workers.

Suggested Citation

Landry, Craig and Lange, Andreas and List, John A. and Price, Michael K. and Rupp, Nicholas G., Is There a 'Hidden Cost of Control' in Naturally-Occurring Markets? Evidence from a Natural Field Experiment (September 2011). NBER Working Paper No. w17472. Available at SSRN: https://ssrn.com/abstract=1935269

Craig Landry (Contact Author)

UGA Ag & Applied Economics ( email )

Athens, GA 30602-7509
United States

Andreas Lange

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

John A. List

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael K. Price

University of Tennessee, Knoxville ( email )

The Boyd Center for Business and Economic Research
Knoxville, TN 37996
United States

Nicholas G. Rupp

East Carolina University - Department of Economics ( email )

Brewster Building
Greenville, NC 27858
United States
252.328.6821 (Phone)
252.328.6743 (Fax)

HOME PAGE: http://myweb.ecu.edu/ruppn/

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