The Effect of Rewards on Performance: In a Standardised Eksperiment

Jens Lev Nytoft Berlin

Student thesis: Master thesis

Abstract

There has been a significant increase in the use of monetary incentives for promoting performance in recent years in spite of a growing body of literature within psychology that find the wellfunctioning of incentives to be more limited than what is prescribed from standard economic theories. The nature of the task in terms of performance type (quality vs. quantity, or complex vs. simple) has been proposed as a significant moderator for the effect of incentives on performance. Simple quantity-type tasks have provided the most consistent positive effect from performance- contingent incentives. To test if the nature of the task is a moderator for the effect of providing incentives, an experiment was performed with 40 students who were randomly assigned a bonus or no bonus treatment. The students solved two complex tasks and one simple task. The hypotheses were that providing incentives would have a positive effect for the simple tasks and a negative effect for the complex tasks. These hypotheses were tested in independent-two-samples t-tests for task scores dependent on incentive treatment. No significant effect of the incentive was found on the performance for the complex tasks. The simple task provided a significantly negative effect of the incentive. This was surprising as it was the task that, from a theoretical perspective, was the least likely to produce a negative effect of the incentive. The experiment tested three specific tasks and the results are specific to these tasks, without being able to determine if the findings generalise to other tasks or task performance in work settings in general.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages91
SupervisorsAleksandra Gregoric