EconPapers    
Economics at your fingertips  
 

ON THE RELATIVE EFFICIENCY OF PERFORMANCE PAY AND NONCONTINGENT INCENTIVES

Uri Gneezy and Pedro Rey-Biel

Journal of the European Economic Association, 2014, vol. 12, issue 1, 62-72

Abstract: We report evidence from a large field experiment that compares the effectiveness of contingent and noncontingent incentives in eliciting costly effort for a large range of payment levels. The company with which we worked sent 7,250 letters asking customers to complete a survey. Some letters promised to pay amounts ranging from $1 to $30 upon compliance (contingent incentives), whereas others already contained the money in the request envelopes (noncontingent incentives). Compared to no payment, very small contingent payments lower the response rate while small noncontingent payments raise the response rate. As expected, response rates rise with the size of the incentive offered. The response rate in the noncontingent incentives rises more rapidly for low amounts of incentive, but then flattens out and reaches lower levels than under contingent payments. We discuss how the optimal policy regarding the use of each size and type of incentives crucially depends on firms’ objectives.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://hdl.handle.net/10.1111/jeea.12062 (text/html)
Access to full text is restricted to subscribers.

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:bla:jeurec:v:12:y:2014:i:1:p:62-72

Access Statistics for this article

Journal of the European Economic Association is currently edited by Fabrizio Zilibotti, Dirk Bergemann, Nicola Gennaioli, Claudio Michelacci and Daniele Paserman

More articles in Journal of the European Economic Association from European Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-22
Handle: RePEc:bla:jeurec:v:12:y:2014:i:1:p:62-72