The Timing of Discretionary Bonuses: Effort, Signals, and Reciprocity

Luke Boosey and Sebastian Goerg

No 11580, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In a real-effort experiment, we investigate how the timing of discretionary bonuses affects the relationship between workers and managers. Average output is substantially higher if bonuses are paid in the middle rather than upfront or at the end, as workers increase first-period output to signal trustworthiness. In contrast, average output does not differ when the decision is made at the beginning or end. When the decision is made upfront, output increases after receiving a bonus but decreases substantially, if the bonus is not paid. This is consistent with negative reciprocity by workers who anticipate, but do not receive a bonus.

Keywords: reciprocity; discretionary bonuses; timing; experiment (search for similar items in EconPapers)
JEL-codes: M5 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2018-06
New Economics Papers: this item is included in nep-exp and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published - published in: Games and Economic Behavior, 2020, 124, 254-280.

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Journal Article: The timing of discretionary bonuses – effort, signals, and reciprocity (2020)
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