The roles of selection and practice in mitigating negative responses to high-powered incentives

Rosario Macera ()
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Rosario Macera: Pontificia Universidad Católica de Chile

Experimental Economics, 2024, vol. 27, issue 5, No 1, 973-1000

Abstract: Abstract Despite substantial evidence for the effectiveness of monetary incentives, some experiments have shown that high-powered incentives might lead to lower performance than lesser incentives. This study explores whether firms have means to counter these potential negative effects. Building on a standard experimental design identifying the drawbacks of large-stake rewards, it shows that when workers either self-select into the task or have prior practice, high-powered incentives lead to higher average performance than a smaller reward. This effect is driven mainly by selection and practice increasing the share of workers who respond positively to high-powered incentives. These results suggest that firms have natural instruments to deal with the potential adverse effects of high-powered incentives.

Keywords: High-powered incentives; Choking under pressure (search for similar items in EconPapers)
JEL-codes: D03 D86 D90 J33 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10683-024-09841-1

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