Is There a 'Hidden Cost of Control' in Naturally-Occurring Markets? Evidence from a Natural Field Experiment

Craig Landry, Andreas Lange, John List, Michael Price and Nicholas Rupp

No 17472, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Several recent laboratory experiments have shown that the use of explicit incentives--such as conditional rewards and punishment--entail considerable "hidden" costs. The costs are hidden in the sense that they escape our attention if our reasoning is based on the assumption that people are exclusively self-interested. This study represents a first attempt to explore whether, and to what extent, such considerations affect equilibrium outcomes in the field. Using data gathered from nearly 3000 households, we find little support for the negative consequences of control in naturally-occurring labor markets. In fact, even though we find evidence that workers are reciprocal, we find that worker effort is maximized when we use conditional--not unconditional--rewards to incent workers.

JEL-codes: C93 D03 J3 J33 (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-exp and nep-hrm
Note: LS PR
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Citations: View citations in EconPapers (8)

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Working Paper: Is There a 'Hidden Cost of Control' in Naturally-Occurring Markets? Evidence from a Natural Field Experiment (2011)
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