Goals, Bonuses and Loss Aversion

Victor Gonzalez-Jimenez, Patricio S. Dalton and Charles Noussair

No 2024-03, Experimental Economics Center Working Paper Series from Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University

Abstract: To enhance workers' motivation, organizations often offer monetary bonuses that are linked to meeting production goals. We argue that when workers set these production goals and are sufficiently loss averse, offering a monetary bonus for goal achievement may backfire. The rationale is as follows: while self-chosen goals can act as reference points that motivate loss-averse workers to increase effort and earnings, a monetary bonus for goal achievement may crowd-out the motivation to set an ambitious goal because workers will not want to miss the bonus offered. Hence, monetary bonuses will induce workers set more conservative goals, attenuating the motivational effects of goal setting. We show experimental evidence consistent with this mechanism.

Keywords: Loss aversion; Goals; Monetary and Non-monetary incentives (search for similar items in EconPapers)
JEL-codes: C91 D81 D86 D90 (search for similar items in EconPapers)
Pages: 34
Date: 2024-10
References: Add references at CitEc
Citations:

Downloads: (external link)
http://excen.gsu.edu/workingpapers/GSU_EXCEN_WP_2024-03.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:exc:wpaper:2024-03

Access Statistics for this paper

More papers in Experimental Economics Center Working Paper Series from Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University Contact information at EDIRC.
Bibliographic data for series maintained by J. Todd Swarthout ().