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Large Stakes and Big Mistakes

Dan Ariely, Uri Gneezy, George Loewenstein () and Nina Mazar

Review of Economic Studies, 2009, vol. 76, issue 2, 451-469

Abstract: Workers in a wide variety of jobs are paid based on performance, which is commonly seen as enhancing effort and productivity relative to non-contingent pay schemes. However, psychological research suggests that excessive rewards can, in some cases, result in a decline in performance. To test whether very high monetary rewards can decrease performance, we conducted a set of experiments in the U.S. and in India in which subjects worked on different tasks and received performance-contingent payments that varied in amount from small to very large relative to their typical levels of pay. With some important exceptions, very high reward levels had a detrimental effect on performance. Copyright , Wiley-Blackwell.

Date: 2009
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