Incentive Magnitude, Reference Point Shifting and Intrinsic Motivation: A Laboratory Experiment

39 Pages Posted: 5 Sep 2018

See all articles by Giovanni Giusti

Giovanni Giusti

Universitat Pompeu Fabra - Tecnocampus

Roberto Dopeso-Fernández

Autonomous University of Barcelona - Faculty of Economics and Business Studies; Autonomous University of Barcelona - Department of Applied Economics

Date Written: June 21, 2018

Abstract

Despite the fact that much research has been devoted to understanding the effect of performance-contingent monetary incentives on individuals’ effort provision, little attention has been dedicated toward understanding whether a sequence of changes in the amount of piece rate an individual receives affects performance. In this paper we examine how effort provision of participants varies in a three-period laboratory setting in which different performance based compensation schemes are implemented for two differentiated tasks. The first task, consisting of downward counting from a big number while each time subtracting a fixed quantity, is considered relatively more challenging, while the second task consisting of counting the number of A’s in a paragraph is considered relatively less challenging.

Our findings are as follows:

(1) Performance contingent incentives affect participants’ effort provision.

(2) The effect is task dependent and it is much stronger for the less challenging task.

(3) A unique increase in the amount of piece rate leads to an increase in performance only in the less challenging task.

(4) A decrease in piece rate incentive negatively affects subjects’ performance on both tasks, but only provided that the decrease follows a previous increase.

Keywords: reference point, piece-rate, monetary incentives, intrinsic motivation

JEL Classification: D01, M52, J33

Suggested Citation

Giusti, Giovanni and Dopeso-Fernández, Roberto, Incentive Magnitude, Reference Point Shifting and Intrinsic Motivation: A Laboratory Experiment (June 21, 2018). Available at SSRN: https://ssrn.com/abstract=3231265 or http://dx.doi.org/10.2139/ssrn.3231265

Giovanni Giusti (Contact Author)

Universitat Pompeu Fabra - Tecnocampus ( email )

Avinguda Ernest Lluch, 32
Mataró, Barcelona 08302
Spain

Roberto Dopeso-Fernández

Autonomous University of Barcelona - Faculty of Economics and Business Studies ( email )

Campus Bellaterra
Barcelona, 08193
Spain
935811153 (Phone)

Autonomous University of Barcelona - Department of Applied Economics ( email )

Departamento de Economía Aplicada
Bellaterra, Barcelona 08193
Spain

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