Using real-effort laboratory experiments with salient incentives, we examine the impact of performance-based versus lump-sum compensation schemes on self-selection and productivity. A laboratory firm offering pay-for-performance compensation achieved significantly higher productivity than an...

We demonstrate that effectiveness of performance-contingent incentives is inversely related to individual risk-aversion levels through two mechanisms: 1) rational optimizing decisions about the amount of effort to supply when effort is positively correlated with risk exposure and 2) the possibly...

We compare misrepresentations of performance under a target-based compensation system with those under both a linear piece-rate system and a tournament-based bonus system using a laboratory experiment with salient financial incentives. An anagram game was employed as the experimental task....