Time to Stop? An Empirical Investigation on the Consequences of Canceling Monetary Incentives on a Digital Platform

Posted: 21 Jan 2022

See all articles by Dongcheng Zhang

Dongcheng Zhang

Tsinghua University

Hanchen Jiang

Tsinghua University - School of Public Policy and Management

Maoshan Qiang

Tsinghua University

Kunpeng Zhang

University of Maryland - Robert H. Smith School of Business

Liangfei Qiu

University of Florida - Warrington College of Business Administration

Date Written: January 8, 2022

Abstract

Digital platforms commonly use monetary incentives to motivate users to perform specific tasks. Extant studies have shown the effects of introducing rewards on the outcomes of interest, such as participation and performance. However, little is known about the impact of canceling rewards and whether it is simply the reverse process of introducing monetary incentives. Our study examines the impact of canceling monetary incentives using a quasi-natural experiment on a large digital enterprise platform. Prior literature has documented that introducing monetary incentives based on contribution quantity increases participation (contribution quantity) but causes a decline in performance (contribution quality). In contrast, our empirical investigation reveals that canceling monetary incentives is not always the reverse process of introducing monetary incentives. In particular, the beneficial (direct) effect of introducing monetary rewards (i.e., increasing participation) is reversible: canceling the existing monetary incentives tends to reduce participation. However, the detrimental (side) effect of introducing monetary rewards (i.e., declining performance) is irreversible: the detrimental effect of declining performance becomes even stronger (i.e., causes a further decline in performance) after the cancelation of monetary rewards. Furthermore, we examine the heterogeneous responses of individuals with different self-motivation types and working competency levels after canceling monetary incentives, which highlight that the impact of canceling monetary incentives is not simply a reverse process of introducing monetary incentives. Our results provide important practical implications for the design of appropriate platform policies.

Keywords: monetary rewards, canceling incentives, heterogeneity, platforms

Suggested Citation

Zhang, Dongcheng and Jiang, Hanchen and Qiang, Maoshan and Zhang, Kunpeng and Qiu, Liangfei, Time to Stop? An Empirical Investigation on the Consequences of Canceling Monetary Incentives on a Digital Platform (January 8, 2022). Available at SSRN: https://ssrn.com/abstract=4003720

Dongcheng Zhang (Contact Author)

Tsinghua University ( email )

Beijing, 100084
China

Hanchen Jiang

Tsinghua University - School of Public Policy and Management ( email )

Beijing, 100084
China

Maoshan Qiang

Tsinghua University ( email )

Beijing, 100084
China

Kunpeng Zhang

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

Liangfei Qiu

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

HOME PAGE: http://sites.google.com/site/qiuliangfei/

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