Lottery-Based Reward Schemes Improve Worker Motivation and Productivity

Abstract

The purpose of this research was to investigate the effectiveness of a probabilistic reward scheme to motivate workers and increase their performance. Across three experiments comprising both physical and cognitive tasks, we compared two novel probabilistic with two traditional non-probabilistic reward schemes. In our flagship “single lottery” probabilistic scheme, worker performance was associated with the accumulation of lottery tickets in the worker’s own personal lottery with a moderate jackpot on offer. It was possible for the worker to accumulate all tickets and thus guarantee the jackpot. We found that the single lottery scheme increased motivation and performance relative to a non-probabilistic piece-rate scheme with the same expected value. We argue that the probabilistic scheme benefited from greater excitement, over-optimism, and the goal gradient effect. In light of perceptions of (un)fairness associated with probabilistic reward schemes, we discuss what labor contexts are appropriate for the introduction of a probabilistic reward scheme.

Keywords: Experiment, Motivation, Performance, Reward, Incentives, Fairness, Justice

JEL Classification: M52