Bonus Payments and Reference Point Violations

Axel Ockenfels, Dirk Sliwka and Peter Werner

Management Science, 2015, vol. 61, issue 7, 1496-1513

Abstract: We investigate how bonus payments affect the satisfaction and performance of managers in a large multinational company. We find that falling behind a natural reference standard for a fair bonus payment (a “reference point violation”) reduces satisfaction and subsequent performance. The effects are mitigated if information about one’s relative standing toward the reference point is withheld. A model and a laboratory experiment provide complementary insights and additional robustness checks. This paper was accepted by Uri Gneezy, behavioral economics.

Keywords: reference points; bonus payments; job satisfaction; job performance; transparency (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (60)

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http://dx.doi.org/10.1287/mnsc.2014.1949 (application/pdf)

Related works:
Working Paper: Bonus Payments and Reference Point Violations (2010)
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