Behavioral economists have proposed that incentive contracts result in higher productivity when bonuses are “loss framed”—prepaid then clawed back if targets are unmet. We test this claim in a large-scale field experiment. Holding financial incentives fixed, we randomized the pre- or...

We examine the impact of individual-level motives upon innovative effort and performance in firms. Drawing from economics and social psychology, we develop a model of the impact of individuals' motives and incentives upon their innovative effort and performance. Using data on over 11,000...

We study a contract change for tea pluckers on an Indian plantation, with a higher government-stipulated baseline wage. Incentive piece rates were lowered or kept unchanged. Yet, in the following month, output increased by 20–80%. This response contradicts the standard model and several...

In three sets of experiments involving over 4,200 subjects, we show that agents motivated to be selfish make systematic decision errors of the kind generally attributed to cognitive limitations or behavioral biases. We show that these decision errors are eliminated (or dramatically reduced) when...

How much do different monetary and non-monetary motivators induce costly effort? Does the effectiveness line up with the expectations of researchers? We present the results of a large-scale real-effort experiment with 18 treatment arms. We compare the effect of three motivators: (i) standard...

We investigate the factors driving workers' decisions to generate public goods inside an organization through a randomized solicitation of workplace improvement proposals in a medical center with 1200 employees. We find that pecuniary incentives, such as winning a prize, generate a threefold...

Many have observed that individuals perform worse after having received a promotion. The most famous statement of the idea is the Peter Principle, which states that people are promoted to their level of incompetence. There are a number of possible explanations. Two are explored. The most...

Firms that maintain no formal record of actions and events would hardly be considered well managed. Yet, organizations that require the recording of actions and the filing of reports are often labeled bureaucratic' and inefficient. This paper argues that the thin line between efficient...

The purpose of this paper is to address the role of endogenous default penalties that are contingent upon the intensity of default on the part of the borrowing nation, and to evaluate the effects of contingency plans that make the interest rate dependent upon variables that are correlated with...