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Carrots that Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes

Omar Al-Ubaydli (), Steffen Andersen (), Uri Gneezy and John List ()

No 18453, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Constructing compensation schemes for effort in multi-dimensional tasks is complex, particularly when some dimensions are not easily observable. When incentive schemes contractually reward workers for easily observed measures, such as quantity produced, the standard model predicts that unrewarded dimensions, such as quality, will be neglected. Yet, there remains mixed empirical evidence in favor of this standard principal-agent model prediction. This paper reconciles the literature by using both theory and empirical evidence. The theory outlines conditions under which principals can use a piece rate scheme to induce higher quantity and quality levels than analogous fixed wage schemes. Making use of a series of complementary laboratory and field experiments we show that this effect occurs because the agent is uncertain about the principal's monitoring ability and the principal's choice of a piece rate signals to the agent that she is efficient at monitoring.

JEL-codes: C93 D01 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-exp and nep-hrm
Date: 2012-10
Note: LS
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Published as Omar Al-Ubaydli & Steffen Andersen & Uri Gneezy & John A. List, 2015. "Carrots That Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes," Southern Economic Journal, Southern Economic Association, vol. 81(3), pages 538-561, January.

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Journal Article: Carrots That Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes (2015) Downloads
Working Paper: Carrots That Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes (2012) Downloads
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