Crowding-Out of Intrinsic Motivation - Opening the Black Box

44 Pages Posted: 20 Jan 2007

See all articles by Antoinette Weibel

Antoinette Weibel

University of Zurich - Faculty of Economics, Business Administration and Information Technology

Katja Rost

University of Zurich - Institute for Organization and Administrative Science

Margit Osterloh

University of Basel; Professor (em.) University of Zurich

Date Written: 2007

Abstract

There is a controversy about the finding that performance-contingent rewards undermine intrinsic motivation. While standard economics states that pay-for-performance increases work efforts, psychological economics counter that it sometimes weakens work efforts. We show both predictions are valid in a job-related environment. Based on a meta-analysis and a vignette study we find a) performance-contingent pay strengthens extrinsic motivation, i.e., elicits a price effect; simultaneously b) performance contingent pay weakens intrinsic motivation, i.e., provokes a crowding-out effect. We disaggregate the net result of both effects contingent on the nature of the task. We show: pay-for-performance always produces hidden costs of rewards.

Keywords: motivation, pay for performance, crowding-out, price effect, meta-analysis, vignette study

JEL Classification: J33, D23, M52

Suggested Citation

Weibel, Antoinette A. and Rost, Katja and Osterloh, Margit, Crowding-Out of Intrinsic Motivation - Opening the Black Box (2007). Available at SSRN: https://ssrn.com/abstract=957770 or http://dx.doi.org/10.2139/ssrn.957770

Antoinette A. Weibel (Contact Author)

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Plattenstrasse 14
Zürich, 8032
Switzerland

Katja Rost

University of Zurich - Institute for Organization and Administrative Science ( email )

Plattenstrasse 14
CH-8032 Zurich
Switzerland

Margit Osterloh

University of Basel ( email )

Petersplatz 1
Basel, CH-4003
Switzerland

Professor (em.) University of Zurich ( email )

Südstrasse 11
Zürich, CH-8008
Switzerland

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