Abstract
Standard economic models with complete information predict a positive, monotonic relationship between pay and performance. This prediction does not always hold in experimental tests: offering a small payment may result in lower performance than not offering any payment. We test experimentally two main explanations that have been put forward for this result: the "incomplete contract" hypothesis views the payment rule as a signal given to subjects on purpose of the activity. The "informed principal" hypothesis views it as a signal concerning the characteristics of the agent or of the task. The incomplete contract view appears to offer the best overall explanation for our results. We also find that high-powered monetary incentives do not "crowd out" intrinsic motivation, but may elicit "too much" effort when intrinsic motivation is very high.
Reference
Roberta Dessi, and Aldo Rustichini, “Work for Image and Work for Pay”, TSE Working Paper, n. 11-252, September 10, 2011.
See also
Published in
TSE Working Paper, n. 11-252, September 10, 2011