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Title:Incentives, decision frames, and motivation crowding out: an experimental investigation PDF Logo
Authors:Irlenbusch, Bernd
Sliwka, Dirk
Issue Date:2005
Series/Report no.:IZA Discussion Papers 1758
Abstract:A simple principal agent problem is experimentally investigated in which a principal repeatedly sets a wage and an agent responds by choosing an effort level. The principal's payoff is determined by the agent's effort. In a first setting the principal can only set a fixed wage in each period. In a second setting the principal has the possibility to supplement the fixed wage with a piece rate. Surprisingly, efforts are lower in the case where piece rates can be paid. Furthermore, switching in the same treatment from a setting where piece rates are available to one where only fixed wages can be paid tends to lead to even lower effort levels. Based on our findings we suggest a new explanation for motivation crowding out by arguing that the use of piece rates considerably alters the principals' and agents' perception of the situation.
Subjects:incentives
crowding-out
reciprocity
reputation
experiment
JEL:C91
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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