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

Omar Al-Ubaydli, Steffen Andersen, Uri Gneezy, John A. List

Research output: Working paperResearch

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.
Original languageEnglish
Place of PublicationCambridge, MA
PublisherNational Bureau of Economic Research (NBER)
Number of pages25
Publication statusPublished - 2012
SeriesNational Bureau of Economic Research. Working Paper Series
Number18453
ISSN0898-2937

Keywords

  • Gift Exchange
  • Piece Rate
  • Incentives

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