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Can higher rewards lead to less effort? Incentive reversal in teams

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Can higher rewards lead to less effort? Incentive reversal in teams. / Klor, E.F.; Kube, S.; Winter, E. et al.
In: Journal of Economic Behavior and Organization, Vol. 97, 01.2014, p. 72-83.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Klor, EF, Kube, S, Winter, E & Zultan, R 2014, 'Can higher rewards lead to less effort? Incentive reversal in teams', Journal of Economic Behavior and Organization, vol. 97, pp. 72-83. https://doi.org/10.1016/j.jebo.2013.10.010

APA

Klor, E. F., Kube, S., Winter, E., & Zultan, R. (2014). Can higher rewards lead to less effort? Incentive reversal in teams. Journal of Economic Behavior and Organization, 97, 72-83. https://doi.org/10.1016/j.jebo.2013.10.010

Vancouver

Klor EF, Kube S, Winter E, Zultan R. Can higher rewards lead to less effort? Incentive reversal in teams. Journal of Economic Behavior and Organization. 2014 Jan;97:72-83. doi: 10.1016/j.jebo.2013.10.010

Author

Klor, E.F. ; Kube, S. ; Winter, E. et al. / Can higher rewards lead to less effort? Incentive reversal in teams. In: Journal of Economic Behavior and Organization. 2014 ; Vol. 97. pp. 72-83.

Bibtex

@article{6f183588ff2c42aca1344617d50d8471,
title = "Can higher rewards lead to less effort? Incentive reversal in teams",
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, i.e., an increase in monetary rewards (either because bonuses increase or effort costs decrease) may induce agents that are fully rational, self-centered money maximizers to exert lower effort in the completion of a joint task. Incentive reversal happens when increasing one agent's individual rewards alters her best-response function and, as a result, removes other agents' incentives to exert effort as their contributions are no longer required to incentivize the first agent. Herein we discuss this seemingly paradoxical phenomenon and report on two experiments that provide supportive evidence. {\textcopyright} 2013 Elsevier B.V.",
keywords = "Externalities, Incentive reversal, Incentives, Laboratory experiments, Personnel economics, Team production",
author = "E.F. Klor and S. Kube and E. Winter and R. Zultan",
year = "2014",
month = jan,
doi = "10.1016/j.jebo.2013.10.010",
language = "English",
volume = "97",
pages = "72--83",
journal = "Journal of Economic Behavior and Organization",
issn = "0167-2681",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Can higher rewards lead to less effort? Incentive reversal in teams

AU - Klor, E.F.

AU - Kube, S.

AU - Winter, E.

AU - Zultan, R.

PY - 2014/1

Y1 - 2014/1

N2 - 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, i.e., an increase in monetary rewards (either because bonuses increase or effort costs decrease) may induce agents that are fully rational, self-centered money maximizers to exert lower effort in the completion of a joint task. Incentive reversal happens when increasing one agent's individual rewards alters her best-response function and, as a result, removes other agents' incentives to exert effort as their contributions are no longer required to incentivize the first agent. Herein we discuss this seemingly paradoxical phenomenon and report on two experiments that provide supportive evidence. © 2013 Elsevier B.V.

AB - 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, i.e., an increase in monetary rewards (either because bonuses increase or effort costs decrease) may induce agents that are fully rational, self-centered money maximizers to exert lower effort in the completion of a joint task. Incentive reversal happens when increasing one agent's individual rewards alters her best-response function and, as a result, removes other agents' incentives to exert effort as their contributions are no longer required to incentivize the first agent. Herein we discuss this seemingly paradoxical phenomenon and report on two experiments that provide supportive evidence. © 2013 Elsevier B.V.

KW - Externalities

KW - Incentive reversal

KW - Incentives

KW - Laboratory experiments

KW - Personnel economics

KW - Team production

U2 - 10.1016/j.jebo.2013.10.010

DO - 10.1016/j.jebo.2013.10.010

M3 - Journal article

VL - 97

SP - 72

EP - 83

JO - Journal of Economic Behavior and Organization

JF - Journal of Economic Behavior and Organization

SN - 0167-2681

ER -