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CAN HIGHER REWARDS LEAD TO LESS EFFORT? INCENTIVE REVERSAL IN TEAMS

Esteban Klor (), Sebastian Kube, Eyal Winter () and Ro'i Zultan ()

No 1309, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: Conventional wisdom suggests that a global increase in monetary rewards should induce agents to exert higher effort. In this paper we demonstrate that this may not hold in team settings. In the context of sequential team production with positive externalities between agents, incentive reversal might occur: an increase in monetary rewards (either because bonuses increase or effort costs decrease) may lead agents to exert lower effort in the completion of a joint task — even if agents are fully rational, self-centered money maximizers. Herein we discuss this seemingly paradoxical phenomenon and report on two experiments that provide supportive evidence.

Keywords: Incentives; Incentive Reversal; Team Production; Externalities; Laboratory Experiments; Personnel Economics. (search for similar items in EconPapers)
JEL-codes: C92 D23 J31 J33 J41 M12 M52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cbe, nep-cta, nep-exp, nep-hrm and nep-lab
Date: 2013
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http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/1309.pdf (application/pdf)

Related works:
Journal Article: Can higher rewards lead to less effort? Incentive reversal in teams (2014) Downloads
Working Paper: Can Higher Bonuses Lead to Less Effort? Incentive Reversal in Teams (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:1309

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