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Incentive magnitude and reference point shifting: a laboratory experiment

Giovanni Giusti (Escola Superior de Ciències Socials i de l’Empresa (Tecnocampus, Universitat Pompeu Fabra) , Barcelona, Spain)
Roberto Dopeso-Fernández (Escola Superior de Ciències Socials i de l’Empresa (Tecnocampus, Universitat Pompeu Fabra) , Barcelona, Spain)

International Journal of Manpower

ISSN: 0143-7720

Article publication date: 26 June 2020

Issue publication date: 28 November 2020

Abstract

Purpose

This paper analyzes how different dynamics of changes in piece-rate incentives affect individuals' exerted effort.

Design/methodology/approach

The authors constructed an across-subjects three-period laboratory setting where, for each period, they exogenously manipulate the amount of piece-rate incentive paid for correct answer. The same experimental conditions were separately applied to two different laboratory tasks, one boring and the other entertaining.

Findings

It was found that performance contingent incentives affect participants' effort provision, while the effect is task dependent and it is much stronger for the boring task. Moreover, a unique increase in the amount of piece rate between periods leads to an increase in performance only for the boring task. A decrease in piece rate incentive between periods negatively affects subjects' performance on both tasks, but only provided that the decrease follows a previous increase.

Originality/value

The paper is the first to study the effect of a sequence of changes in the amount of piece rate incentives on individual effort provided. Our main result highlights the relevance of the order in which the sequence of changes in piece-rate incentive occurs. Results could be useful for the designing of performance rewards in organizations.

Keywords

Citation

Giusti, G. and Dopeso-Fernández, R. (2020), "Incentive magnitude and reference point shifting: a laboratory experiment", International Journal of Manpower, Vol. 41 No. 8, pp. 1157-1177. https://doi.org/10.1108/IJM-09-2019-0428

Publisher

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Emerald Publishing Limited

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