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Title:Can higher bonuses lead to less effort? Incentive reversal in teams PDF Logo
Authors:Klor, Esteban F.
Kube, Sebastian
Winter, Eyal
Zultan, Ro'i
Issue Date:2011
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5501
Abstract:Conventional wisdom suggests that an increase in monetary incentives should induce agents to exert higher effort. In this paper, however, we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive reversal might occur: an increase in monetary incentives (either because rewards increase or effort costs decrease) may lead agents to exert lower effort in the completion of a joint task - even if agents are fully rational, self-centered money maximizers. Herein we discuss this seemingly paradoxical phenomenon and report on two experiments that provide supportive evidence.
Subjects:incentives
incentive reversal
team production
externalities
laboratory experiments
personnel economics
JEL:C92
D23
J31
J33
J41
M12
M52
Persistent Identifier of the first edition:urn:nbn:de:101:1-201104113740
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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